RBA governor Philip Lowe will appear before the standing committee on economics on Friday, with chair Tim Wilson saying “there have been few times when monetary policy has been more consequential”.
“The decisions the RBA are making has an impact on everyone, and with cheap easy money pushing up asset prices, and the spectre of inflation and higher super that could soften wage increases on the horizon, there needs to be scrutiny of the consequences of their decisions. Issues of the governance culture within the RBA remain a point of public discussion and also need to be properly scrutinised,” Mr Wilson said.
The statement likely refers to correspondence that appeared on the RBA freedom of information disclosure log late in 2020, where a departing senior researcher called the bank’s organisation “dysfunctional” and said that the board “does not understand monetary policy or statistical research”.
“I am most frustrated by the bank’s reluctance to be honest and open. The bank says things about the effect of policy on confidence, the likelihood of the zero bound, the effectiveness of policy, the effect of interest rates on financial instability, the effects of negative interest rates and so on that are contradicted by internal and external research,” the researcher, who spent nearly a decade at the bank, wrote in a letter to colleagues.
“But we don’t even acknowledge that, let alone respond to it.”
The remarks – which also accused decision-makers of being “hostile to consideration of evidence or research” – elicited a response from assistant governor Luci Ellis, who reminded the researcher that “obligations to keep confidential and sensitive information, including policy discussions, within the bank still apply”.
“While I was sometimes frustrated – especially when during my time in FS (financial stability department) – at the way you often argued with a position we weren’t taking, I recognise that your efforts, passion and disagreements came from a genuine concern for good analysis. I disagree with your diagnosis of what you have observed about the policy process, but understand that different people have different perspectives,” Ms Ellis wrote.
The standing committee will also scrutinise the RBA’s recent decision to step up its quantitative easing program with the purchase of another $100 billion in government bonds.
