There’s a lot riding on the first big review in decades of the Reserve Bank of Australia (RBA).
Its terms of reference are comprehensive, ranging from an assessment of monetary policy arrangements to culture, management and recruitment. But it would be a mighty missed opportunity if this inquiry — launched in July and expected to report in March — doesn’t look at the people behind the decisions and how they navigate the changes that affect the rest of us.
If judgment was made on headlines, Treasurer Jim Chalmers would be class dux. He’s cool and calm, authoritative, warm and educated. But he also comes from a background where he understands that not everyone is born with a cot full of opportunities.
The headlines around big issues — such as the inquiry into the RBA and the need for well-being to become a pillar of the annual budget — have been greeted warmly. But like most things, the fine print doesn’t always deliver on the grandiose promises. In this case, a magnifying glass is needed to spot the budget’s well-being measures.
The inquiry into the central bank risks meandering down the same path, and this is why.
Australia is at a crossroads with a huge, complex and changing economic environment with challenges around each corner. We need a central bank to get the levers right. It needs to be form-fit to meet variables that traverse pandemics to natural disasters.
That’s what it says it does, although judgment varies widely on the timing and size of its recent cash rate rises. But does it consider the consequences of those decisions? Does the Reserve Bank — or the largely anonymous experts who make it up — understand the impact of cost of living?
It sounds trivial but it’s not. Do they fill their own car with petrol? Do they have a mortgage or a small business? Do they make these decisions on paper, or for the community?
The central bank’s job is one of the most important and most powerful in the nation, perhaps sitting just under prime minister and Australian cricket captain. But do you know any of the names or details of those who make up the Reserve Bank?
Challenge an educated friend and watch them fail to name a majority of members, who include Philip Lowe as governor, Michele Bullock as deputy governor, and members Mark Barnaba AM, Wendy Craik AM, Ian Harper AO, Carolyn Hewson AO, Steven Kennedy PSM, Carol Schwartz AO, and Alison Watkins AM.
They’ve all got lots of letters after their names — and they are all stellar in their fields of business and leadership and tax — but shouldn’t we know a bit more about them, and what they bring to a decision that acts as a game-changer to family budgets?
Paying the mortgage is becoming tougher for many, joining a confluence of cost-of-living rises that mean Australians are being forced to change schools, cancel Christmas holidays and consider selling their home.
How do we know those making the decisions genuinely understand that?
The Reserve Bank meets 11 times each year, on the first Tuesday of every month, except January. And those meetings are almost always in Sydney — although two are usually scheduled for other cities. Perhaps it’s only a small move, or even more about perception, but what if those decisions next year were made around a table at the RSL in Wagga Wagga in NSW, or the local school hall in Dalby in Queensland?
What if the public could go along and ask questions so they understood how and why decisions were made? That surely would meet Chalmers’ promise that our monetary policy framework operates in the interests “of the Australian people and their economy’’.
The credentials of the three people charged with reviewing the bank are impeccable. Carolyn Wilkins is a former deputy governor to the Bank of Canada, Professor Renée Fry‑McKibbin is one of the nation’s leading macroeconomists, and Dr Gordon de Brouwer has 35 years’ experience in public policy and administration — including in the Australian Treasury and the Reserve Bank.
Perhaps the make-up of our bank is just right. But that’s a question the review team should consider: do its members offer the skills and expertise and life experience to deliver the best decision? And are the consequences of their monthly rulings considered sufficiently?
We’d all be better off knowing that.
Would you like to be a fly on the wall of an RBA board meeting? What questions would you ask the board, given the chance? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
How many have investment properties, and in what numbers?
I think I know enough Its full of comfortably well off econocrats who won’t have a problem paying a power bill are strong believers in the economic rationalist fairy tale and who produce consistently inaccurate forecasts They’ve been forecasting wage rises that never materialised for years
The question I’d like to ask the RBA is what economic formula are they using to come up with these steeply increasing rate rises? And is that economic formula fit for purpose? Because this is not typical inflation. It is not discretionary spending that’s driving up inflation, it’s the price of fuel – opportunistically gouged by the fossil fuel companies, trickling down into everything else, added to by the mandates that are still in effect in some industries and a whole heap of people off sick. Vast numbers of people have no discretionary spending at all, they’re too busy deciding what other essentials they can go without so as to pay the power bill and put fuel in the car to get to work. These rate rises themselves have an effect of increasing the cost of everything else. Have they taken that totally obvious stuff into account with their formula? Who benefits from these rate rises?
https://www.abc.net.au/news/2022-11-09/reserve-bank-philip-lowe-interest-rates-tough-worked-before/101629740
AM, AO, AM, AO – yes, lots of fancy letters. But is anyone aware that the RBA takes it’s instructions from the BIS, Bank of International Settlements based in Basel Switzerland. The BIS wouldn’t have a clue regarding the impact of it’s policies here in Australia.
Those letters are actuallyawards, pats on the back, aren’t they, rather than actual qualifications?
And then there is the Federal Reserve the US equivalent of the RBA. As we all know the Federal Reserve is not Federal at all but is a fully private concern owned by private banks. Is there a better way to put the fox in charge of the hen-house?
Utter rubbish. The Federal Reserve was created by the 1913 Federal Reserve Act, which created a Federal Reserve System of twelve public-private regional banks. Its core responsibilities include setting interest rates, managing the money supply, and regulating financial markets. It also acts as a lender of last resort during periods of economic crisis.
The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate.
” Federal Reserve System of twelve public-private regional banks.”
Utter what? It’s a private banking system. The US Govt does not set the parameters. The private banks do.
The 1913 Federal Reserve Act sets the parameters.
Evidence?
Read the Act
That’s not evidence.
So you’re too lazy to read it then?
The Federal Reserve consists of 12 central banks whose shares are owned by private banks.All policy accept for a few token govt appointees is set by those same private banks.For someone, like you, who has claimed over 40 years banking experience you sure don’t know anything.
Are you still here? I had hoped that you had back to Uni to study finance and economics.
Cutting and pasting from Wikipedia doesn’t count. The Board of Governors of the Federal Reserve is appointed by the President and confirmed by the Senate. You don’t seem to understand the different between Federal Reserve District Banks (that deliver services) and the Federal Reserve Board of Governors itself! The FOMC are the part of the Federal Reserve that makes Monetary Policy for the US, not the Fed Districts.
The Federal Open Market Committee (FOMC) consists of twelve members–the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.
If you are going to try and debate things that you have zero actual knowledge on how about you read the actual Act!
You may care to read Sections 2, 2A & 2B at a minimum.
Should you be too lazy to do so, I draw your attention to their web page which outlines who are the Board of Governors and who appoints same.
“The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.
The Chair and the Vice Chair of the Board, as well as the Vice Chair for Supervision, are nominated by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member’s term on the Board is not affected by his or her status as Chair or Vice Chair”
https://www.federalreserve.gov/aboutthefed/bios/board/default.htm
Your continued persistence in maintaining your conspiracy theory line certainly confirms your lack of education and experience in both Finance and Economics.
The RBA does not “take its instructions” from the BIS. The BIS provides its 63 Central Banks with:
1. a forum for dialogue and broad international cooperation,
2. a platform for responsible innovation and knowledge-sharing, and
3. in-depth analysis and insights on core policy issues.
In other words, they provide information on best practice, strategies etc but it is always the RBA’s decision whether to implement same after consideration of local conditions.
Where do you people get this rubbish?
“1. a forum for dialogue and broad international cooperation,
2. a platform for responsible innovation and knowledge-sharing, and
3. in-depth analysis and insights on core policy issues.”
You are dressing this down. Please site me an example when the RBA did not follow the BIS “best practice”? “Basel 3 would be a good place to start. The BIS’s mission is to support central banks’ pursuit of monetary and financial stability through international cooperation, and to act as a management practices. The RBA are not out of line with world “best practice objectives of a study by the Reserve Bank of Australia and the Bank of International Settlements.” Best practice is code for “or else”.
Where do you get your “rubbish” from?
You are doing the usual “blame game” and conspiracy rubbish.
The RBA has input into best practice as a member bank so I would damn hope that they apply same.
Best practice is not a code for “or else”. The BIS has no control over Member Banks BTW.
My “rubbish” is from a career of more than 40 years at a senior level in Banking & Financial Services both Domestic and International. What about you?
“Headquartered in Basel, Switzerland, the Bank for International Settlements (BIS) is a bank for central banks. The BIS was created out of the Hague Agreements …As the banker’s bank, the BIS serves the financial needs of member central banks. It provides gold and foreign bank transactions for them and holds central bank reserves. The BIS is also a banker and fund manager for other international financial institutions.” Investopedia
All western financial system banks are in lockstep with the BIS. The RBA is a member bank.
And?
Suggest that you familiarize yourself with Section 10 of the Reserve Bank Act 1959 which governs the functions in the Reserve Bank Board and its duties.
BTW. Basel III is a framework that set international standards for bank capital adequacy, stress testing, and liquidity requirements.
The lessons of the GFC highlighted the need for full, timely and consistent implementation of the Basel standards to underpin confidence in banks, prudential ratios and a level playing field.
The Australian Government agreed to financial reform as part of the G20.
The Reserve Bank is not subordinate to the BIS. Best Practice is called that for a reason.
“Best Practice is called that for a reason.”
Yeah – the highest cash rate in 9 years said the BIS to the RBA – “best practice.”
Clearly you have little to no knowledge of either the banking system or economics let alone the functions of the BIS including global standards for financial health.
BTW. Raising rates is the proven way to control inflation. Still nowhere near the heights of previous decades. I love how people don’t complain when rates are low!!!
“I love how people don’t complain when rates are low!!!”
The issue is that it’s the BIS that applies “best practice” to the member banks whether they are high or low interest rates and the member banks like the RBA follow suit. An international body, not the RBA, is dictating Australian financial policy.
Again you betray your complete lack of knowledge of banking and finance as well as economics, the role of BIS or the role of the RBA.
The BIS has absolutely zero say in Australian Monetary Policy. Monetary Policy is set by the RBA based on the RBA’s assessment of both Domestic and International Economic conditions.
You don’t even understand what Basel III is let alone what Best Practice is from a Central Bank perspective!!!
Even the complete financial troglodytes in the Media are starting to wake up.
https://www.abc.net.au/news/2022-11-09/reserve-bank-philip-lowe-interest-rates-tough-worked-before/101629740
For all those endlessly whining about the Reserve Bank and its Monetary Policy, I would suggest they familiarize themselves with Section 11 of the Reserve Bank Act 1959.
http://classic.austlii.edu.au/au/legis/cth/consol_act/rba1959130/s11.html
Yeah, but where’s the evidence that the Bank’s Board has carried out all of its duties ( especially b and c below ) that “…ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
a. the stability of the currency of Australia;
b.the maintenance of full employment in Australia; and
C. the economic prosperity and welfare of the people of Australia.
Where is the evidence that they aren’t doing so? Raising interest rates to reduce demand and lower inflation is standard economic practice. And it works.