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If ever there was a time for the best and brightest to make policy, the epic struggle underway against inflation might be a good one. Yet Australia’s central bank is shackled to an anachronistic personnel selection that has left it hostage to an era when little scrutiny was expected — or demanded. Some change is almost certainly coming, but don’t look for an overnight revolution.
Shielded by a decades-long run of growth before the pandemic, this is an uncomfortable moment for the Reserve Bank of Australia (RBA). Consumer price increases are the most rapid in more than a generation and officials have unleashed a series of big interest-rate hikes in an effort to contain them. That alone has brought some withering critiques of how the bank works. Now, an outside panel appointed to review pretty much every aspect of the bank’s structure, culture and operations is getting down to work. The RBA’s board won’t be spared an examination, according to an issue paper. Rightly so. Australia has lagged the world for a while.
The three people presiding over the RBA’s performance review questioned whether there are sufficient monetary experts on the nine-person board and too many business types. Also under consideration is whether votes of RBA directors should be published or dissents be disclosed without names. That these are even issues in 2022 is an indictment not just of the bank, but of successive governments — regardless of party — that have protected the RBA.
Not that monetary-credentialed officials are flawless. Inflation is much too high for comfort around the world, including in places like the US and UK that pack their rate-setting panels with economists
and academics, as well as former bankers and administration officials. They make mistakes, too, and can also fall prey to groupthink, with dire consequences. But there’s a voting record published. People can count on being asked in interviews and after speeches if they hiked, advocated for a cut, or favored a pause.
Even relatively junior members of the Federal Open Market Committee know it comes with the territory. Some seem to crave the attention — members of the Fed’s board of governors have no other job. Same with the Bank of England’s Monetary Policy Committee. The European Central Bank’s governing council is comprised of national central bankers and an executive board.
—Bloomberg