OPINION: The next RBA boss could find themselves battling a dysfunctional rate setting board which feels compelled to reject the governor’s view from time to time.
There is now little doubt that Australia is about to enter an extremely challenging economic period, with stubbornly high inflation, sluggish growth, and growing consumer and business stress.And that means that the next RBA governor – and the new interest-rate setting board – are about to face some extremely difficult decisions. These decisions will be even more difficult if the new board is dysfunctional.
The obvious problem with the review’s recommendation is that while this new breed of appointees might well be brilliant economists, they’re unlikely to have a track record in working as part of a team, or of making tough decisions under pressure. The review’s criticism makes it highly likely that all new appointments to the RBA interest-rate setting board will conclude that one of their key performance indicators is to reject the RBA governor’s recommendations at least once a year.
As a result, the governor’s recommendations reflect not just the response to the latest batch of economic figures, but the previous discussions that have resulted in a common view on how to best navigate a complex situation. What’s more, if you accept the review’s position that the job of the new interest-rate setting board is to be confrontational and to periodically oppose the governor’s recommendations, then it puts senior RBA executives in an invidious position.
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