New RBA governor Michele Bullock risks losing control of interest rates to outsiders on the board, under a “radical” recommendation accepted by the government.
New Reserve Bank of Australia governor Michele Bullock risks losing control of interest rates to outsiders on the board, under a “radical” recommendation accepted by the government, former RBA boss Ian Macfarlane has warned.
Mr Macfarlane disputed that the new model would be “world’s best practice”, arguing the proposed monetary policy committee was “very bad policy” and a “leap of faith”. “They put forward the proposal that we conduct an experiment that no other central bank has conducted, which is giving the part-time members of the board a majority of the votes in monetary policy decisions.“The part-timers will have two-thirds of the voting power. And in fact they’ve got twice as much voting power as the governor, the deputy governor and the Secretary of the Treasury combined.“That is a very radical solution.
“It’s never been the case that the governor just comes with a recommendation and just forces it through.“The decisions are genuinely taken by nine people together, and we discuss issues from every angle. But Mr Macfarlane said the RBA board traditionally acted more like an “advisory” committee and less like a voting board, allowing the governor and bank insiders to retain control of monetary policy.
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