MNI: New RBA Board To Push For Greater Transparency
MNI (MELBOURNE) - Newly-minted Reserve Bank of Australia external board member Renee Fry-McKibbin is likely to insist on the ability to share her view on monetary policy decisions publicly at a “policy issues meeting” this month, pushing back against senior RBA leadership that would prefer conformity, former staffers told MNI.
Fry-McKibbin, one of the three authors of 2023’s RBA Review and a seasoned macroeconomist, will probably push for closer adoption of the report's 50 recommendations, said Luke Hartigan, former RBA economist and lecturer at the University of Sydney. This would come after Deputy Governor Andrew Hauser’s recent comments to a Senate Estimates meeting that public speeches by members will likely represent the board’s assessment rather than the individual’s view.
Hartigan said Hauser's suggestion ran against the spirit of the review's recommendations, which called on board members to provide periodical public comments. “The idea that [board members] are giving comments is important to make sure that they are paying attention to what staff are saying and they are reading their briefing,” he added.
Board members should be allowed to articulate their thinking and not just toe the RBA line, he said. “They're allowed to be consenting or dissenting," Hartigan continued, noting members should not be made to fear holding an opinion. "If it's just toeing the line of the bank, then it's not really adding to our understanding."
The Reserve has split the board and its functions into two as part of its implementation of the review's 50 recommendations. Interest-rate decisions will be the responsibility of the Monetary Policy Board, which will spend more time and have greater access to RBA staff and research before voting, while the Governance Board will deal with operational issues. Marnie Baker, former CEO of Bendigo and Adelaide Bank, has also joined the board.
However, Fry-McKibbin is best-placed to usher in the board's new era due to her work on the review, Hartigan argued. "She will be the most qualified person to help make sure that the new structure goes the way the review wanted it to go."
The new board will hold its first policy meeting from March 31 to April 1. The RBA cut its cash rate by 25 basis points to 4.10% at its February meeting, though Governor Michelle Bullock sought to temper market expectations for further easing. (See MNI: RBA To Cut In May, Neutral To Guide Further Easing)
MUTED CHANGE
John Hawkins, former RBA economist and professor of economics at the University of Canberra, noted the new board will not lead to a significant change in monetary policy settings, as the new members did not hold extreme positions.
Fry-McKibbin did not respond to emailed questions.
While the new structure in time could mean better, more in-depth policy, he questioned whether greater transparency would lead to significantly different outcomes, pointing to the Australian National University’s shadow board that offered a higher level of detail on individual member decisions, but which generally followed the RBA closely. Giving members a more vocal platform might add more noise to contentious policy decisions, Hawkins argued.
"Ideally, if you have people who are more focused, you might get marginally better decision making. So you might get a slightly better outcome. Doesn't necessarily mean they're always going to be more dovish or hawkish, but they might be making the right decision slightly more often."
While little is known about Baker's stance, Fry-McKibbin notably backed lower rates in early 2022 during her tenure on the shadow board, as inflation climbed and the RBA kicked off its tightening cycle.