Sep 28, 2023: Australian Treasurer Jim Chalmers said on Thursday criticism of proposed reforms to the central bank’s policymaking board by one of his predecessors was “bizarre and wrong”, as questions grow over how a more independent board would affect policy.
In an opinion piece in The Australian newspaper, former Treasurer Peter Costello said the review of the Reserve Bank of Australia, which recommended setting a separate rate board with six outside members, ran the risk of undermining monetary policy.
Former RBA governor Ian Macfarlane has made similar criticisms recently, saying the proposed changes would weaken the authority of the governor. Costello and Macfarlane formalised the RBA’s inflation target in 1996.
Among the concerns are recommendations to appoint six outside experts to the nine-member policy board and give them more autonomy, which could create uncertainty around policy and even lead to a situation where the RBA governor was outvoted.
“These members would have a great deal more latitude than a minister to disagree with collective decisions. They would get a lot more latitude than a normal director of a public company.” said Costello, who was in office from 1996 to 2007 and is Australia’s longest-serving treasurer.
“Whether the public would be better informed by differing opinions from these various experts is another matter.”
The six external members on the current board consist of mostly business executives. The RBA governor and deputy governor and the treasury secretary are the other three members.
The RBA has already adopted some of the recommendations from the review, including having fewer but longer policy meetings and holding a media conference after each decision, but remains undecided on others, including having all board members making regular appearances to discuss their thinking on policy.
Chalmers has said that while he respected Costello, he disagreed with his view of the RBA reforms as the board size would not change.
“It is bizarre and wrong to suggest that somehow there’s some kind of radical change being proposed here. There are six external members right now on the decision-making board, there’ll be six external members afterwards.”
Chalmers commissioned the review of the RBA in July 2022.
Source Courtesy: Reuters/Investing.com