Populating the new monetary policy board solely with economists would be a backward step, Reserve Bank governor Philip Lowe says.
The governor favours a diverse board that includes business people and labour market experts.
Dr Lowe’s comments follow recommendations made in an independent review of the RBA that called for experts in macro-economics, the financial system, labour markets or the supply side of the economy to sit on a specialist monetary policy board.
He said the new board set up – including the governor, the deputy governor, treasury secretary and six outside people appointed by the government – was fundamentally the same as it was now.
“The issue is the nature of the people the government appoints to the board, and that’s a matter for the government of the day,” he said.
Dr Lowe said the public had been well-served by board members coming from a variety of backgrounds.
“I don’t support the idea of the monetary policy board being made up of economists or primarily economists,” he told a parliamentary hearing on Wednesday.
“We’ve got enough economists at the bank.”
He said he valued people with expertise in running private businesses, those who understood the labour market and those with experience in making public policy under uncertainty.
“It’d be a backward step to appoint to the monetary policy board only economists,” he said.
The governor said it was up to the government of the day to appoint the right people to the board.
“The current government has just appointed two people a few weeks ago who meet that criteria,” he said.
“Neither of them are experts in monetary theory but I know they’re going to bring a great deal of expertise to the bank and balance to our hundreds of economists, so I hope that continues.”
Dr Lowe reiterated his frustration with the review that depicted a board unable to challenge his ideas on interest rate settings.
“It created an impression that at the meetings I come in with my recommendation or my models or my data and say ‘this is what we should do’ and say to the board members ‘I hope you agree – let’s go to lunch’,” he said.
“That is not how it works at all.”
He said there was active debate, with contrary points of view raised at each meeting.
The review of the RBA was handed down last month, with the governor welcoming most recommendations.
The three-person review panel recommended a suite of reforms to boost the central bank’s leadership and decision-making, including two separate boards, press conferences after cash rate decisions, and fewer meetings in a year.
(Australian Associated Press)