RBA Shakeup- Apr 2023
The RBA review was released to the public and the Reserve Bank recently, following a comprehensive inquiry into the bank’s responsibilities, objectives, governance, monetary policy framework and operational capabilities. It featured 51 recommendations. The review was welcomed by Philip Lowe and the RBA looks to build constructively from its recommendations.
Salient details of the review centred around the governance role of the RBA. The review recommended a separation of monetary policy and governance boards, granting greater external purview into policy rate deliberations in a move to increase transparency into the bank’s monetary policy operation. Additionally, communication enhancements were proposed, along with the appoint of a Chief Operating Officer to improve core processes underpinning the RBA’s key operations. The frequency of board meetings were recommended to be reduced to eight a year, a proposal that mirrors existing norms in foreign central banks. A major change comes in a revision of the Reserve Bank’s objective outlined in the bank’s mandate. Economic prosperity will constitute an overarching objective for the RBA, while price stability and full employment remain as dual objectives. The purpose is to reduce overreach in the RBA’s interpretation of its objective, eliminating ambiguity in its operational scope. In the press conference today, Governor Lowe emphasised that price stability and full employment will not pose as conflicting objectives, rather the pursuit and management of both outcomes will continue to guarantee broader macroeconomic stability in Australia.