Key Points
- Why it matters
- First independent review of the Reserve Bank orders sweeping overhaul
- Two new boards will deal with monetary policy decisions and governance separately
- The rate-setting panel will be filled with experts and be expected to challenge the governor
- Rates decisions will occur eight times annually, down from 11
Unions say the appointment of former Fair Work Commission president, judge and ACTU assistant secretary Iain Ross to the board of the Reserve Bank was a better choice than an actual trade union representative.
Amid low-level grumbling within conservative and business circles, Mr Ross and company director and former ACTU official Elana Rubin were appointed by Treasurer Jim Chalmers to replace outgoing board members Wendy Craik and Mark Barnaba.
Mr Ross, who presided over generous pay rises for low paid workers before resigning from the commission in November last year, two years shy of the mandatory retirement age, is most likely to join the bank’s new monetary policy board when the bank restructure begins on July 1 next year.
The RBA review said the new monetary policy board required members with diverse perspectives and knowledge, including people with labour market expertise.
In the early 1990s, Mr Ross was assistant secretary to then-ACTU boss Bill Kelty, the last trade unionist to sit on the RBA board.
Current ACTU secretary Sally McManus, who has been critical of the lack of diversity on the RBA board and its penchant for “groupthink” around “outdated economic theories”, said the union movement did not seek a seat on the board because “we want to maintain our independent voice in terms of being able to criticise decisions and thinking if necessary”.
“Obviously, you’ve got different obligations if you’re also then sitting on the board, so we didn’t want to have that conflict,” she said.
‘No one more qualified’
She said that would remain the ACTU’s position “so long as the government has people there that can fill that skills gap, which really is about understanding in a deep way how wages work in Australia”.
“That’s what they’ve done. There’s no one more qualified actually than Iain Ross,” she said.
“It’s really good for the country because you’re going to have someone there that actually understands that there’s not going to be a wage-price spiral because we’ve got a different system to what we had in the 1980s.”
After initially declining to comment in the interests of bipartisanship, shadow treasurer Angus Taylor questioned the appointments, saying the methodology recommended by the review was not followed,
“We were disappointed that the first two appointments that have been made by the Treasurer. He completely ignored the recruitment process, the merit-based rigorous process that is laid out in the review,” he said.
“We do think it is important that the government is going to say it supports the recommendations of the review, it walks the walk and doesn’t just talk the talk.”
Former Treasury economist Steven Hamilton, who campaigned for the RBA review and more experts on the board, questioned both new appointments.
“The Treasurer made two appointments to the RBA board – incidentally, both former ACTU officials,” he said.
“Still, only one external appointee is a professional economist, which flies in the face of the review’s focus on the need to build expertise on the board.”
One senior business figure who asked not to be identified said “the old IR club is alive and well”.
“Without centralised wage fixing and compulsory super, neither would have been anyone of note.”
Another, who also did not want to be named, said the appointment of Mr Ross and Ms Rubin detracted from an otherwise good announcement on the bank restructure.
“He comes with a bit of a perspective,” he said of Mr Ross.
Australian Council of Social Service chief executive Cassandra Goldie welcomed the new appointments, saying the most disadvantaged deserved representation.
Read more on the RBA shake-up
- What fewer RBA meetings means for mortgage rates Questions remain about when the meetings would occur and whether banks will undertake more out-of-cycle interest rate moves.
- RBA shake-up orders fewer meetings, more experts and press conferences The RBA will be remade into an institution that more closely resembles other advanced economy central banks in a sweeping overhaul unveiled on Thursday.
- The subtle change in how the RBA must manage inflation The bank will be expected to publicly discuss in more detail its goals for the labour market, via a narrower mandate focused on full employment and inflation.
- All 51 recommendations from the RBA review The RBA will get more experts for a separate board to set interest rates and will hold fewer board meetings with mandatory press conferences. Here are all the recommendations.
- RBA staff surveys reveal central bank at risk of ‘groupthink’ A culture that concentrates decision-making in a handful of senior leaders and a failure to be more open to external views are among some of the issues at the RBA.
- RBA’s role in climate change policy is limited, says review The Reserve Bank should take climate change into account, but supporting the energy transition should not be an explicit goal of interest rates policy.
- The RBA’s billion-dollar blunders, and why we’re still paying for them The review of the Reserve Bank outlines how and why Australians are paying a high price for the central bank’s pandemic policy mistakes.
- RBA governor’s powers to be diluted The next governor of the Reserve Bank will not be a one-person show and will inherit more expert board members capable of contesting the bank’s decisions.
- RBA shake-up orders fewer meetings, more experts and press conferences The RBA will be remade into an institution that more closely resembles other advanced economy central banks in a sweeping overhaul unveiled on Thursday.
- RBA’s new rate-setting board to move beyond inexpert ‘pub test’ RBA board members drawn from business and industry lacked the expertise to scrutinise and challenge interest rate recommendations of RBA staff, the review found.