Economists split as Reserve Bank to reveal rate-setting votes

The Reserve Bank will now publish the unattributed votes of its board members, but the move has divided economists and former central bankers.

Reserve Bank governor Michele Bullock during a press conference last month. Picture: NewsWire / Nikki Short

The Reserve Bank will now reveal how its board members voted on interest rate decisions without naming them, but the change – agreed to by governor Michelle Bullock and Treasurer Jim Chalmers – has divided former board members and economists over fears it could spark politically driven witch hunts.

The Treasurer and Ms Bullock met last Wednesday to discuss the remaining changes in the most significant set of reforms undertaken at the RBA since it was formed in 1967, delivering on the recommendations of a detailed review of the central bank undertaken in 2023.

The changes have so far included the establishment of a new specialist rate-setting board after the review found existing board members collectively lacked the expertise to challenge the interest rate decisions of the governor.

Treasurer Jim Chalmers and Reserve Bank governor Michele Bullock. Aaron Francis / The Australian

Previously, board members’ votes on interest rate decisions were never identified – only whether there was consensus support for the bank’s recommendation to cut, hold or hike.

Both the government and the RBA have agreed that if consensus on a decision is not reached, a record of unattributed votes will be published.

Following approval by the rate-setting board at its July 7-8 meeting, the change will take effect in August and be reflected in the RBA’s statement on the conduct of monetary policy, which outlines its relationship with the government.

Dr Chalmers has repeatedly argued that the changes would not politicise the central bank, and will instead ensure greater transparency.

“They’re all about reinforcing the Reserve Bank’s independence, clarifying its mandate, modernising its structures and strengthening its accountability,” he said.

But there is division about the impact such a record of voting would have.

The RBA’s former head of financial stability, Jonathan Kearns, now chief economist at financial services company Challenger, said he thought the change would put undue pressure on board member independence.

“It’s a tough one. The RBA has more outsiders on its board than other central banks so it puts a lot of pressure on them if they can be in any way identified. It’s going to be harder for them to form independent views. But I think a tally is still important,” Dr Kearns said.

Former RBA board member Dick Warburton said he was opposed to recording votes.

“I wouldn’t be in favour of having votes revealed (unattributed or not). The trouble is that it can be turned into a political decision not an economic decision,” Mr Warburton said.

Former RBA board member Dick Warburton. Hollie Adams/The Australian

Bob Gregory, also an ex-RBA board member, said he understood the rationale for why a voting record might seem appropriate but was, on balance, against it.

“When I was on the board it was not a board of experts so I would have argued against publishing the votes, and I think I would be against board members having to explain why they voted the way they did. Now the monetary committee members are experts so it seems to me that this shifts the balance of the debate a bit towards publishing how you voted and why,” Mr Gregory said.

“The votes should be treated as confidential. I think I would still be a bit inclined not to ask for a voting record because I think there is too much froth and bubble around short-term influences and everyone guessing what the bank should do, often in response to the latest bit of information, which may not have much real content.”

Centre for Independent Studies chief economist Peter Tulip, a former RBA official, backed disclosing votes and names, saying board members who can’t defend their decisions or prioritise the national interest shouldn’t hold the job.

“I think there are strong arguments for publishing names like the Federal Reserve does. They make big decisions so they should be expected to explain them and be accountable,” Dr Tulip said.

“There was logic for secrecy under the old system but board members are meant to be selected on expertise so there is appetite for their votes to be made public.”

Other senior RBA employees said there would be little difference.

Former assistant governor Luci Ellis, now chief economist at Westpac, said all three models can work, including no votes, attributed and unattributed.

“A lot depends on how stakeholders choose to respond to the information. I am not aware of any empirical evidence that the choice between these models materially improves economic outcomes coming from monetary policy decision processes,” Dr Ellis said.

Ian Macfarlane, RBA governor from 1996 to 2006, said: “I don’t think it’s a big deal either way.”

Dr Chalmers and the RBA are also expected to decide whether members of the rate-setting committee will make public appearances, after the review recommended each give at least one speech or public engagement per year.

RBA watchers have warned that change could “muddy” communication about monetary policy, confusing household borrowers and financial markets about the direction of interest rates.