“And so some people have suggested that that be split up.”
The Bank of Canada and the Bank of England have a board that oversees the management and administration of the bank, while separate monetary policy committees set interest rates.
“It’s really a question of clarity of roles and responsibilities and putting the right people in the right place,” said Ms. Wilkins.
A “really high bar” to pass
“As well as a better ability to have a company-wide view of operational governance, as a regular board would, while allowing the monetary policy group or board to really focus and have the time to make those decisions you need.”
Any potential recommendation to change the board structure would need to consider whether having two boards would make the central bank more bureaucratic, she said.
Legislative change to the Reserve Bank Act would also be required, which would set a “really high bar”, Ms Wilkins said.
Amid growing criticism of the central bank’s interest rate policy, Treasurer Jim Chalmers launched an independent review of the central bank in July, including its long-term inflation target, monetary policy tools, board structure, accountability and culture.
Australian National University economics professor Renee Fry-McKibbin, former senior finance official Gordon de Brouwer and former deputy governor of the Bank of Canada Ms Wilkins have received more than 100 written submissions, interviewed more than 1000 RBA staff and former senior RBAs -Officials and outside economists interviewed.
They are due to present their results in March.
Professor Fry-McKibbin said there was broad agreement that flexible inflation targeting has worked well over the past 30 years and most people don’t think it needs changing.
The 2 to 3 percent inflation target in the monetary policy statement between the governor and treasurer is “about right” but the provision “on average over time” is “a little vague” and could be made clearer, she said.
However, Professor Fry-McKibbin said that future supply shocks are likely to vary from climate change, energy prices and geopolitical events, making it worth considering the merits of a different target such as nominal income, price level or average inflation.
“So let’s look at all these different types of frameworks,” she said.
Former RBA board member Warwick McKibbin, husband of Professor Fry-McKibbin, has been the most vocal supporter of central banks lowering the inflation target in favor of nominal income as the global economy enters a period of more frequent shocks.
Review filings have criticized the RBA’s incorrect forward guidance during the pandemic that rates were unlikely to rise before 2024 and the associated yield curve target, which ended abruptly.
dr de Brouwer said the bank was “too slow” to recognize inflationary pressures and needed to be very clear about its “exit strategy” from unorthodox policies.
“The lesson to be learned from this is to be agile in different frameworks and to ensure that there is challenge and a range of views that are available,” he said.
On a cultural note among the RBA’s 1400 employees, Dr. de Brouwer that “hierarchy” and “silos” should be dismantled in order to encourage debate and challenge among employees at different levels and improve decision-making.
“It’s not as open, it’s not as open in terms of its internal debate as it could be.”
The review also considers the finance minister’s role on the RBA board and whether this is consistent with independence from government.
The Treasurer appoints board members, usually in close consultation with the RBA Governor and the Treasury Secretary.
The reviewers raised the prospect of a more formal and transparent application and appointment process.
dr de Brouwer said the role of RBA board members is not to represent a specific “constituency” but rather to represent the interests of the Australian people on price stability and full employment.
When the government makes changes to the RBA, Treasurer Jim Chalmers seeks bipartisan cooperation with the coalition.
“The government wants the review to be as bipartisan as possible – so I’ve made sure the opposition is kept informed of their progress,” said Dr. Chalmers.
The RBA review panel briefed shadow treasurer Angus Taylor on Wednesday.
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