The much-hyped review of the RBA didn’t deliver all that much
So the financial papers last week were full of stories of the review into the RBA.
This was the first review of the RBA’s operations since it became independent in the 1990s.
It was due.
But if you were hoping for radical change at the Martin Place offices, you’ll be disappointed.
In fact, to my eyes, it was a bit of a nothing burger.
There is a plan to reduce the number of meetings a year from eleven down to eight. The idea here is that fewer meetings gives the board an opportunity to do better research and make better decisions.
Maybe.
But then if I had to have meetings with a bunch of economists regularly, I’d prefer to have fewer meetings as well.
There’s also plans to shake-up the monetary policy board – replacing captains of industry with actual economists with actual monetary policy experience.
This makes sense. I don’t think there’s a recorded instance where the board has voted against the recommendation of the Governor. So a bit of expertise might help hold the RBA staff to more account.
At the margin, that will probably give us better outcomes.
Probably the only thing that might amount to anything of substance is a requirement that the RBA publish estimates of how long they think it will take to get back to their targets of low inflation and full employment.
This could be interesting.
The RBA has always had a mandate for delivering stable inflation and full employment. But in practice, the focus has been on inflation, and full employment was left to Canberra.
The reporting requirement might force full employment back on to the RBA’s agenda.
Sometimes the only way you can buy low inflation is with higher unemployment. That’s where we’re at right now. Inflation is too high, so we’re raising rates to slow the economy, which will naturally increase unemployment.
That’s not too bad, since unemployment is at a 50-year low right now.
But what if it wasn’t. What if unemployment was at 10%?
If we crunch the economy to bring inflation down, what happens to unemployment?
And what happens when the RBA is forced to report that they think unemployment will go even higher, before maybe coming back down again in ten years.
That’s going to create a very interesting public discussion.
And so it seems to me that the proposed reforms potentially elevate employment in the RBA’s priorities.
And maybe that’s not a bad thing.
Maybe we should have a discussion about how much unemployment we’re willing to bear to bring inflation down.
We could be having that discussion now. But we’re not.
So if that happens – and we’ll have to see how this plays out in practice – then that might give us a slightly different monetary policy universe.
But other than that, it’s a bit of a nothing burger.
JG.
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M.J. Amaro-Enchautegui says
Rachael Rofé and her partners will take y
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SINCERELY,
[email protected]
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STAY AWAY FROM THE LHS “Low Hanging system”
M.j. Amaro-Enchautegui says
LHS is NO GOOD STAY AWAY FOR THEM!!!!
IF YOU WANT TO KEEP YOUR MONEY💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸
YOU WILL NEVER EVER S👀 YOUR MONEY BACK!!!
STAY AWAY FROM THE LHS “Low Hanging system”