“The Review of the Reserve Bank of Australia (RBA) presents a measured, and far from revolutionary blueprint both for strengthening the governance of the RBA and for clarifying the conduct of monetary policy,” Innes Willox, Chief Executive of the national employer association Ai Group, said today.
“Notwithstanding ardent criticism of the RBA from some in recent months and the fact that the Bank may have underestimated the strength and duration of the recent surge in input cost pressures, the Review rightly highlighted the quality and effectiveness of the RBA’s performance over an extended period.
“The Government’s in-principle agreement to accept all recommendations and to build support for the changes with stakeholders and across the parliament is very encouraging.
“The business community encourages the Government to consult closely and broadly as it sets up the Governance Board and the specialist Monetary Policy Board.
“The conduct of monetary policy is crucial to our economic success and outcomes at national, business and individual levels. Board independence and transparency and openness about appointments to the board, the decisions made and perspectives on economic trends are vital to further building confidence in a crucial institution.
"The recommendation for the board to have a dual focus on inflation and full employment is not a departure from the existing aims of monetary policy. The Bank currently has a duty to contribute to full employment as well as price stability. The Review’s recommendations do however propose the RBA becomes more explicit about what 'full employment' means and what measures the RBA uses to assess excess capacity in the labour market. The review also proposes that the RBA become more explicit about how it balances the employment and inflation objectives. We see these recommendations as having the potential to clarify and provide greater transparency about the considerations relating to the Bank’s full employment objective,” Mr Willox said.
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