An overhaul of the Reserve Bank of Australia recommended by an independent review is unlikely to have a significant impact on policy and it’s unclear whether the changes are even required, according to AMP Capital Markets’ Shane Oliver.
(Bloomberg) — An overhaul of the Reserve Bank of Australia recommended by an independent review is unlikely to have a significant impact on policy and it’s unclear whether the changes are even required, according to AMP Capital Markets’ Shane Oliver.
The review, released last week, called for changes to the RBA’s rate-setting board, fewer policy meetings and regular press conferences. It found that Australia’s economic performance has been “very good” over the past three decades, attributing the success in part to the RBA’s actions and the current monetary policy arrangements.
“So if the proposed model is not demonstrably superior, why make the change to it,” Oliver asked rhetorically in a research note on Wednesday. He said the recommendations are based on foreign central bank models such as those in the US, UK, Canada and New Zealand.
“Those countries have not necessarily achieved better economic outcomes than the RBA,” Oliver said.
The RBA report was commissioned by the new Labor government and followed harsh criticism of the bank from investors and some economists over issues ranging from its bungled exit from a yield target program to flawed rate guidance and poor communication.
Oliver said there is a risk the RBA could become more hawkish under the new structure like some global peers, which have been more aggressive “and arguably less balanced in raising interest rates than the RBA has.”
Goldman Sees Hawkish RBA Rate Implications From Australia Review
Australia’s central bank has lifted borrowing costs by 3.5 percentage points between May last year and March to take the cash rate to 3.6% — well below international counterparts — citing a desire to preserve employment gains made during the pandemic.
“Some of what is proposed by the review has merit, but it’s not clear that the basic foreign central banking model proposed is superior to what we have now,” Oliver said. “We risk throwing out the baby with the bathwater.”
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