Philip Lowe and Reserve Bank about to face a moment of truth | swrighteconomy
in this masthead in April last year, outlining criticisms in economic circles of the bank, its handling of policy and its governance structures, proved the staging ground for the review demands.Chalmers made clear his review would be of the “RBA goals and objectives, tools and levers, processes and public commentary”. He also wants it to look at the “most appropriate relationship between fiscal and monetary policy”.
“Monetary policy has been under strain globally in the years prior to COVID, as interest rates have fallen and conventional monetary policy has become less potent,” he says. “There are considerable challenges ahead, and how we navigate those is vital to our economic prosperity and the welfare of the Australian people,” she says.
Some economists, such as former RBA board member Warwick McKibbin, believe the whole concept of inflation targeting should be revisited. Hethat, given hitting the inflation target had proven almost impossible, alternatives should be examined. Outside of the inflation target, there are a number of issues that will be in included in the review.
McKenzie, formerly the economist at the ACTU, maintains full employment should be the goal of the Reserve Bank. She says even the actions of the RBA during the pandemic, when it took real interest rates negative , are open to debate. Ted Theodore, treasurer in the Scullin government, wanted the central bank board to take representatives from the community. The idea has become one of the defining features of the RBA.
“Regular reviews of central banks should examine whether the bank’s processes for accountability, transparency and decision-making are optimal in the light of research and recent developments, particularly among foreign central banks,” he says. Within a decade, the RBA – due to sweeping changes in global attitudes towards central banking – moved to its present policy of maintaining inflation between 2 per cent and 3 per cent.
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