How RBA shake up will affect Aussies

Under the central bank’s first major overhaul since the 1990s, the RBA would be brought closer into line with its international peers and separate monetary policy from the current board that oversees the bank’s day-to-day operation.

The review, released on Thursday, recommended the board meet eight times a year rather than monthly, and regular press conferences to boost its accountability.

The three reviewers said a shift from the current structure of 11 meetings per year, down to just eight, would allow more time to consider the issues and engage with RBA staff within each cycle.

Over the past year, the central bank and Governor Philip Lowe came under intense scrutiny for how monetary policy decisions – particularly rate rises – have been communicated.

Dr Lowe told Australians as late as November 2021 that the bank was likely to hold the cash rate steady at 0.1 per cent until 2024.

Since May 2022, the cash rate has risen to 3.6 per cent.

The review, conducted by Canadian former central banker Carolyn Wilkins, Australian National University economics professor Renee Fry-McKibbin and the Secretary for Public Sector Reform Gordon de Brouwer, said more transparency was required.

“Monetary policy processes should be more transparent, with press conferences after each meeting, papers published after five years, and board members occasionally speaking publicly about the work of the board,” the reviewers said.

The review also recommend establishing two separate boards: one concerned with monetary policy to set interest rates, and a separate governance board to handle the rest of the RBA’s remit.

The role of the governor would also be watered down. The independent review found that while the high profile leader should be on each of boards, it should not be able to chair them both.

Instead, the bank should appoint an external member to chair its governance board. The governor will continue to oversee the monetary policy committee.

More to come.