The Reserve Bank of Australia’s board should be overhauled to include more monetary policy experts and a trade union representative, according to the Australian Banking Association.
Key monetary policy objectives such as inflation targeting should remain, though governance of the central bank should be hived off into a new board led by an independent director and not the governor.Those are key recommendations contained in the ABA’s submission to the independent review of the central bank, which includes input from some of the financial industry’s leading economists.
The new board would be chaired by an independent director instead of the governor, and retain the remuneration, audit and risk subcommittees.in addition to business and union representatives who could hold either voting or non-voting status.accused the RBA board of being a “closed shop” and made a similar recommendation.
It also wants the bank to be clearer about the trade-offs in pursuing its key objectives of currency stability, maintenance of full employment and economic prosperity and welfare for Australians. On the bank’s key role in targeting inflation to a 2 per cent to 3 per cent target band over the cycle, the ABA said this should not be changed as it provides flexibility to respond to the prevailing circumstances.“We support maintaining inflation targeting compared to other approaches such as nominal income targeting for several reasons,” the submission said.
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