RBA board members drawn from business and industry lacked the expertise to scrutinise and challenge interest rate recommendations of RBA staff, the review found.
The failure of the Reserve Bank of Australia board to vote against a single recommendation of the bank’s executive once in the last decade or to challenge emergency pandemic measures was used to justify the creation ofThe review found the board’s outside members – drawn from business, industry and government and community boards – lacked the expertise to scrutinise and challenge with sufficient rigour the financial and economic judgments underlying interest rate recommendations of the RBA’s...
“Current and former Reserve Bank board members themselves described the Reserve Bank board’s role in various ways, ranging from providing real-time feedback on the economy, to an informed second opinion, to a ‘pub test’ of how decisions might be understood by the public,” the review found.“These explanations centred on the external members providing a non-expert challenge to the RBA executive’s proposed monetary policy approach.
In a key recommendation that will reshape the way interest rates are set in Australia, the review recommends the establishment of a separate monetary policy board of macroeconomics experts to set interest rates.
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