RBA Review Puts Everything Up For Discussion

The issues paper released today by the RBA review panel covers four areas: monetary policy arrangements, performance against objectives (CPI, unemployment rate), governance and the institution. They discuss a range of issues and potential reforms. It aims to adapt the central bank to a new era with different challenges.

• It is looking at the appropriateness of an inflation target and if so, what should it be, given that the bank has missed it consistently in recent times.
• Other tools are also being considered to deal with supply shocks, including climate events, geopolitical episodes and pandemics. Whether there is a role for central banks in the switch to a lower-carbon economy is also being considered.
• The concept of central bank independence is also under review to see if there should be a greater role for government and regulators in handling economic fluctuations when rates are close to the zero bound.
• Alternative central bank board compositions are being considered with the option for a separate monetary policy board consisting of policy makers and professional economists and another board for governance matters.
• The panel is considering whether board members’ votes should be published, as in other central banks.
• Suggestions are also being made on how to improve accountability and communication.
• The RBA’s culture is being appraised.
• A consultation period now follows the publication of the paper and the final review is to be published in March.