Former senior Reserve Bank economist unloads on why the central bank makes ‘bad’ decisions

In a bombshell resignation speech, a former senior Reserve Bank economist has lambasted the central bank.

The Reserve Bank of Australia has been the target of unusually high profile criticism in recent days. Picture: NCA NewsWire / Jeremy Piper

The Reserve Bank’s “dysfunctional” decision making processes have led to “bad” monetary policy decisions, according to a former senior RBA economist who also accused the central bank of no longer acting in the public interest.

In a bombshell resignation speech emailed to colleagues on August 12 and released under Freedom of Information legislation on Friday, Peter Tulip took his opportunity to vent his “frustrations” at the end of nine years in the RBA’s highly respected economics department

“Like most of you, I want a career where I serve the public interest,” Mr Tulip, now chief economist at the Centre for Independent Studies, wrote in his speech. “My main reason for leaving is that I no longer believe the RBA does that.”

“It isn’t just that I disagree; it’s more fundamental. I think the decisions are bad because the processes are bad. There is little deliberation. Opposing views are not taken into account. Decision makers seem hostile to a consideration of evidence or research.”

The sharp criticism by the recently departed Mr Tulip came hard on the heels of a similarly damning assessment by former prime minister Paul Keating, who last week accused the “high priests” of the RBA of “indolence” in responding to the economic crisis triggered by the pandemic.

Mr Tulip agreed with this verdict, saying that in its reluctance to ease policy the central bank has been too timid in pursuing its inflation mandate.

In his August resignation speech, Mr Tulip accused the RBA board – which he said “does not understand monetary policy or statistical research” – of ignoring the economic evidence when making its decisions on rates.

“Our disagreements over the zero (cash rate) bound or financial stability reflect ‘judgment’ in the way that disagreements over climate change, the health effects of tobacco, or vaccination reflect judgment,” he said. “It would be more accurate to say that one side respects the research while the other side believes what it wants to believe.”

The interventions first by a former prime minister and now an ex-senior staff member of long standing are especially notable as criticisms of the deeply respected and independent Reserve Bank have historically been confined to the margins.

A spokeswoman for the RBA declined to comment.

Mr Tulip on Friday evening was unrepentant, telling The Weekend Australian: “I stand by everything I said in the email”.

“I know that many of my ex-colleagues at the RBA disagree with me,” he said. “I also know that many agree.”

In his speech, Mr Tulip said “I recognise that these problems are not the bank‘s fault”.

“We have a board that does not understand monetary policy or statistical research. FOI legislation greatly stifles policy deliberation. The media misreport us. The public criticise errors of commission and ignore errors of omission. So although there are lots of great people at the bank, our environment makes the organisation dysfunctional. Whatever the reason, I do not belong here.”