ANALYSIS: As rates continue to rise, the central bank is under review and its governor is due to end his term. There’s also speculation Treasury wants a bigger say in the bank.
In several weeks’ time, the three-member panel charged with conducting the
“And I want to make sure that whoever we appoint as governor has the ability to put in place the directions that we agree after having received the report.”, as it tries to silence the Reserve Bank as an alternative source of economic commentary, and reestablish its former monopoly over policy advice.
Peter Costello, the former Liberal federal Treasurer, who is now chairman of the government’s $196 billion Future Fund and chairman of Nine, owner of“The first is to decide whether to continue with the inflation targeting regime that was formally put in place in 1996 when [the then Reserve Bank governor] Ian Macfarlane and I exchanged letters,” Costello says.“My view is that the inflation targeting regime is appropriate. There’s no better regime and it would be a mistake to move from it.
Of course, the Reserve Bank isn’t the only central bank that is now struggling to subdue a surge in inflation. “Our board decided that given that outlook that we wanted to send a very clear message to the community that the Reserve Bank would do whatever it could do to keep the economy functioning through what was projected to be a very long and costly downturn – unemployment 15 per cent.”“And one of the things that we thought we could do was to buttress the state-based forward guidance with being clearer about when we thought interest rates would rise.
“These bonds are now completely underwater. The execution of their own forward guidance wiped out the market value of those bonds. And the losses have wiped out the Bank’s equity.The Australian housing market is under pressure after nine rate rises.“They should have been tightening in 2021 and 2022 as a lot of people – including myself – were urging them to do.”
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