McKibbin: Let the devil hold RBA to account

Via Warwick McKibbin today:

In recent weeks, Treasurer Josh Frydenberg has signalled his intent to endorse a new Statement on the Conduct of Monetary Policy. Typically, amendments to The Statement have occurred with a change in government or a change in Governor of the Reserve Bank of Australia (RBA).

It is critically important that this departure from the norm does not threaten the independence of the RBA.

…Any changes to the RBA’s policy strategy should occur within an articulated and transparent framework of review, not within the closed doors of Government. In the case of politically motivated changes, anything short of this sets a dangerous precedent which will compromise central bank independence.

That’s a reasonable point though the review still needs independence from the RBA as well. Internal reviews have a habit of agreeing with the status quo.

The RBA needs some accountability. Phil Lowe has been ignoring his mandate for years. The Bank was especially slow to recognise the unfolding bust this year.

But the timing of the Recessionberg review is suspiciously political given his other property bubble policies:

  • overly tight fiscal policy;
  • corrupting APRA;
  • FHB bribes.

All add up to a Government manically intent on inflating asset prices.

So, we’re damned if do and damned if we don’t.

What we really need is a warts and all inquiry into all financial regulators to address the diffused responsibility between the RBA, APRA and ASIC on the conduct of monetary and prudential policy. Not another fiddle, a substantial restructuring.

It might be called the Murray Inquiry or maybe the Hayne Royal Commission!

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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