WHY THE REVIEW? In July 2022, Treasurer Jim Chalmers announced the review of the RBA, setting the objective of identifying how to make it "the world's best and most effective central bank into the future". It is the first independent and comprehensive review of the central bank since the current approach to monetary policy began in the 1990s.
WHO CONDUCTED IT? The report was authored by three monetary policy experts: Carolyn Wilkins, an academic who sits on the Bank of England's Financial Policy Committee and is a former senior member of Canada's central bank; Renée Fry-McKibbin, a professor of economics at Australian National University; and Gordon de Brouwer, an Australian government bureaucrat appointed to lead and implement public sector reforms.
The authors consulted monetary policy experts as well as members of the public. In total, it reviewed hundreds of interviews and submissions, 12 focus groups and more than 1,000 survey responses.
WHAT WERE THE FINDINGS?
The 272-page review makes 51 specific recommendations under
14 broader headings, grouped into 5 themes. They include:
* A clearer monetary policy framework: the RBA will have a
dual mandate to contribute to price stability and full
employment; and its inflation targeting objectives will be
clarified
* Stronger monetary policy decision making and
accountability, including the new Monetary Policy Board
* A more open and dynamic RBA: greater transparency and
accountability around decisions and more open and constructive
debate
* More robust corporate governance, including the
establishment of a new Governance Board to support and oversee
management
* Steps to ensure RBA leaders drive institutional and
cultural change, including the creation of new senior leadership
roles
WHAT WAS THE RESPONSE? Chalmers and RBA Governor Philip Lowe both welcomed the publication of the report.
"Australia faces a complex and rapidly changing environment, and we need the most effective central bank and monetary policy framework to meet current and future economic challenges," Chalmers said in a statement, adding the government would support all 51 of the recommendations made in the report.
Lowe said he had believed for some time there was a strong case to strengthen the governance of the RBA.
"The review has been timely, with the RBA facing an increasingly complex world and operating environment," he said. "The recommendations will help us deal with this more complex world and will strengthen the monetary policy process and governance of the RBA."
WHAT ARE KEY CHANGES VS CURRENT SETUP The new specialist board to manage monetary policy will give independent expert members more responsibility for setting interest rates. Currently RBA officials have more power over policy.
The proposed dual mandate of price stability and full employment differs from the current broad remit for the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. The review also aim for greater transparency on RBA policy, with the members of the new board encouraged to speak more.
There will be eight policy meetings per year, down from 11 now, bringing the RBA in line with international practice.
WHAT HAPPENS NEXT?
While many of the recommendations could begin to be
implemented, several will require legislation to pass though
Australia's parliament before they can be enacted.
Chalmers said the government and the RBA will renew a
"Statement on the Conduct of Monetary Policy" by the end of the
year. The statement sets out how the government and governor
interpret the RBA's legislated objectives, including the
inflation target.
The review recommended the government legislate changes to
start from July 1, 2024. Chalmers told a news conference on
Thursday he was confident the changes would be ready to be
implemented by that date.
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FACTBOX-Key recommendations in Australia's review of the RBA Australia's central bank to get new rate-setting board under
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(Compiled by Alasdair Pal in Sydney
Editing by Shri Navaratnam)
