Like it or not, you’ll be hearing a lot more from the quiet people who try to keep the Australian economy on an even keel.
The review of the Reserve Bank of Australia, published on Thursday morning, has pinpointed failures of communication from an opaque institution in its assessment of the central bank’s recent performance.
For instance, the forward guidance howler when interest rates were near zero and Governor Philip Lowe ran with the narrative that rates would not rise until 2024 at the earliest.
Of course there were “detailed caveats” that surrounded that advice, but as the review panel said, “they were not well understood by the public”.
The RBA’s reputation was dented and many “low information” borrowers made huge commitments thinking there would be years of breathing space with ultra-cheap money.
It’s true that the central bank works in a highly technical way, and independently, but that means it should also be more accountable to keep faith with the public.
Over the years, the RBA has improved its transparency: explaining monetary policy decisions in statements after every board meeting, releasing board minutes two weeks later, and key officials delivering speeches and answering questions from the floor during those events.
But that’s been inadequate.
“The RBA’s regular communications are less transparent than those of some other peer central banks, despite significant advances in recent decades,” the review said.
“While the frequency of speeches and parliamentary appearances have increased, press conferences are infrequent, explanations of policy strategy lack important detail, and there is limited information available about the range of views within the Board.
“Accountability mechanisms for external Board members, such as an expectation that they should explain the Board’s decisions in public, are lacking.
“More broadly, communication with the public is not as effective as it could be.
“The RBA should better explain its policy choices through regular press conferences and increasing the amount of information available about policy deliberations, strategy, and the RBA’s forecasts.
“The RBA’s communications should include the reasoning behind decisions, what alternative policy options were considered, and how current policy settings fit into a broader strategy.”
The panel recommended press conferences after each meeting, papers published after five years, and board members occasionally speaking publicly about the work of the Board.
Given the new monetary policy board will now include experts in macroeconomics, finance and the labour market, there will be a swirl of new voices in the policy arena explaining the thinking inside the control room at Martin Place.
That will mean more controversy.
But the panel says the RBA also needs to open the black box of its models and data.
“Overall, the Review is of the view that the RBA’s communications should focus less on the publicly available facts and more on the reasoning behind monetary policy decisions,” it said.
“The RBA should provide more clarity around why alternative policy options are not pursued, and how current policy settings fit into a broader strategy to achieve its objectives.”
Those are not only massive changes for an institution that can be aloof – trust us, we know what we’re doing – but also for our own ability to take in more information in a saturated info-ecosystem.
Ready or not, our public space is going to be a lot busier, richer, if not noisier.
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