MNI BRIEF: RBA Review To Leave No Stone Unturned

An issues paper released by the panel reviewing the Reserve Bank of Australia will embolden critics calling for substantial reforms by placing all aspects of its operations under the microscope, including its monetary policy framework.

Thursday’s release of the issues paper offers the prospect of a Board shake-up to include more monetary policy experts, as well as enhanced transparency around deliberations, voting and dissenting opinions.

The Bank’s inflation targeting regime, tools, forecasting, communication, board composition and culture will be appraised by the panel overseen by Professor Renee Fry-McKibbin, senior bureaucrat Dr Gordon de Brouwer and former deputy Bank of Canada Governor Carolyn Wilkins (See AUSTRALIA : RBA Review Puts Everything Up For Discussion).

The paper identified challenges posed by lower interest rates and supply shocks as a driver of a review into whether the 2-3% target remains appropriate. It noted research advocating alternative frameworks like price level and nominal GDP targeting. Policy tools will also be assessed following the abandonment of yield curve control policy last November. Forecasting, research and communication will be reviewed.

The paper spotlighted whether the Board should have more monetary policy experts beyond Governor Philip Lowe and deputy Michele Bullock. The paper noted some central banks have a separate monetary policy board with a “narrower composition” of experts and professional economists. The review will consider Board structure, composition and appointment processes.