Philip Lowe outlines major Reserve Bank shake-up

The RBA board will meet less frequently, take longer to deliberate and explain its rates decisions to the public, in line with the findings of a review commissioned by the Albanese government.

RBA governor Philip Lowe. Picture: NCA NewsWire / Martin Ollman

The Reserve Bank of Australia’s board will meet less frequently, take longer to deliberate on interest-rate settings and try to better explain its decisions to the public, in line with the findings of an independent review commissioned by the Albanese government.

In a speech in Brisbane on Wednesday, RBA governor Philip Lowe also outlined an initial set of changes to the central bank’s accountability, research priorities, management, culture and five-yearly reviews of the monetary policy framework.

But the board has delayed some of the most controversial recommendations – including the creation of a new expert advisory group on interest rates, publishing an unattributed vote count on decisions and more frequent public appearances by board members to discuss policy – until new legislation is passed by parliament and the new monetary policy board is up and running.

Dr Lowe said this “will avoid the current Board locking the new Board into a particular approach”, noting that Australia’s board structure of seven outsiders out of the nine members “is unusual by international standards”.

“In almost every other central bank, most of the decision-makers are insiders – that is, they spend the bulk of their time inside the central bank,” he said.

“The Australian model has the advantage of ensuring there is diversity of thought and it helps bring a wider perspective to monetary policy decisions.

“However, it does have implications for the way those decisions are communicated and the appropriate accountability mechanisms.

“In my view, it is right to allow the new Board to consider these issues and make its own decisions after due deliberations.

The RBA chief revealed the new monetary policy board would meet eight times a year, rather than the current 11, and would issue a statement on its policy decision, instead of the governor doing so.

From February next year, longer board meetings, stretching over two days, would be followed by a press conference headed by the governor.

“The Board, rather than just the Governor, will be the signatory to the Statement on the Conduct of Monetary Policy, which is the document that records the common understanding on monetary policy between the RBA and the Australian Government,” he said.

“The new Statement is expected to be finalised later this year.”

The current policy statement was settled when Scott Morrison was treasurer in 2016, the year Dr Lowe was appointed to his seven-year term.

The central bank chief said other changes recommended by the three-person review, published in April, including the legislation the RBA operates under, were a matter for the Australian Government and the parliament.

“One overarching principle the Board has sought to apply in working through the

various recommendations is that the RBA should be as transparent as it reasonably

can in a way that is useful to the community,” he said.

“We want the community to understand what we are doing, why we are doing it and the factors we consider in making our decisions.

“The changes I have laid out are a significant step in this direction and the new Board will have the opportunity to consider the merits of further steps.”

Dr Lowe said the changes “represent a substantive and meaningful response to the RBA Review”.

“They will enhance our decision-making and our communication and will help us be the open and dynamic organisation that we aspire to be.

“We have an important job to do on behalf of the Australian community. The Bank staff are committed to doing that job to the highest possible standard. These changes will help us do that.”

In line with the review’s call, the RBA will establish a new communications department and appoint a chief operating officer to improve the central bank’s efficiency and responsiveness.