RBA review: Reserve Bank refresh is on shaky ground

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RBA review: Reserve Bank refresh is on shaky ground
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Nothing good comes form negotiating with the Greens. The better option is Jim Chalmers cutting a deal with Angus Taylor to establish the new monetary policy board.

Already a subscriber?The most significant recommendation of last year’s Reserve Bank Review – the creation of a monetary policy board to decide on interest rates – is. Two former RBA governors have publicly expressed opposition to it. The federal opposition looks unwilling to play ball. And nothing good ever comes out of the government negotiating with the Greens.

Under the present RBA regime, the governor is the monopoly supplier of interest rate policy. There are distinguished Australians on the board, but nobody to effectively challenge the house view. And as Nobel-prize-winning economist John Hicks once observed: “the best of all monopoly profits is a quiet life.” So I understand why then-governor Philip Lowe was not so excited about the external review of the bank, and relinquishing that monopoly.

But it’s the practical issues with how to implement the monetary policy board that looms large at present. And these issues present the biggest obstacle to the creation of a structure which helps the RBA make better interest-rate decisions. Obstacle four is the part-time nature of the proposed monetary policy board about which – to his credit – Macfarlane has raised concerns.

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