The proposed overhaul of the Reserve Bank (RBA), which aims to split the bank into two boards – one for interest rate decisions and one for governance – has hit a roadblock.
Just weeks ago, the government launched a blistering attack, accusing the RBA of “smashing the economy” and “punching itself in the face”, casting serious doubt on its decision making.
The Coalition subsequently withdrew its backing for the RBA reforms, with shadow treasurer Angus Taylor voicing fears the government would stack the board with its own appointees, while the Greens introduced tricky demands in exchange for their vote – demands the Labor government has since called “crazy”.
As the reform hangs in the balance, an investment strategist has suggested that there is merit to a dual board structure.
“I personally like the dual board structure,” GSFM investment strategist Stephen Miller told InvestorDaily.
He described the opposition’s disapproval as “shortsighted”, arguing that there are viable strategies to ensure a well-balanced board.
“Angus Taylor can just say, ‘I’ll tell you what, can we agree on candidates for the board’, or ‘Can we change the structure’. So still have a monetary policy board but, I think Challenger’s Jonathan Kearns suggested this, can we have five bank staff and four independents?” Miller said.
“Between the two of them [Taylor and Chalmers], they should be able to come up with an arrangement that satisfied both of them, in terms of screening those appointments to the RBA board.”
In an opinion piece for The Australian Financial Review, Kearns argued that the RBA board’s structure, originally derived from the Commonwealth Bank board, was never intended to handle the complexities of modern monetary policy decision making.
He suggested the RBA monetary policy setting board could comprise five internal bank members and four external expert members.
Miller agreed, noting that this would take the pressure off the governor.
AMP’s Shane Oliver has been a vocal opponent of the dual-board structure. Speaking to InvestorDaily recently, the chief economist said that a two-board system could lead to a takeover by “egotistical economists”, threatening to overshadow the Reserve Bank and skew its decisions.
“There was no evidence provided to suggest that an independent rate setting board is world best practice. There was no evidence provided that it would lead to better outcomes in Australia. There was no evidence provided that the Reserve Bank has been making major mistakes,” the chief economist said.
“I think the best approach is to call it quits and work in a bipartisan way to strengthen the process of appointing board members to the existing board in the future.”
In response to recent criticism directed at the RBA by certain Labor Party members, including Wayne Swan, who accused the bank of “punching itself in the face”, Miller stated that the RBA has maintained an “orthodox” approach compared with its counterparts in other developed countries.
Moreover, the investment strategist called out politicians for their contradictory stance of supporting an independent central bank while simultaneously embroiling it in political controversies.
“That could blow back on them,” he said.
Ultimately, Miller said that while Chalmers is willing to negotiate the future board structure, Taylor’s approach was misguided, and he views the Greens as more focused on symbolism and gestures than on substantive economic realities.
