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Reserve Bank governor Philip Lowe has announced big changes to the RBA board in response to the recent review of the central bank.
Key points:
- The RBA Board will meet 8 times a year, cutting back from 11
- The RBA governor will hold a press conference after each board meeting
- The monetary policy framework will be reviewed every five years
Dr Lowe says from 2024, the RBA board will only meet eight times a year, rather than 11 as is currently the case, but each meeting will go for longer.
He said the RBA governor will hold a press conference after every board meeting to explain the board's interest rate decision.
The RBA board will oversee the bank's research agenda as it related to monetary policy.
The board will also work with Treasury to undertake five-yearly open and transparent reviews of Australia's monetary policy framework, to ensure that the framework keeps adapting to changes in the global economy.
"At its recent meetings, the Board has spent time discussing the Review's recommendations," Dr Lowe said on Wednesday, in an address at the Economic Society of Australia (Qld) Business Lunch in Brisbane.
"The world we face is increasingly complex and it is right to re-examine how we make and communicate monetary policy decisions and how the RBA is managed.
"Together, these changes are significant and represent a substantial response to the recommendations of the Review," he said.
The full list of changes
They were among a larger number of changes announced by Dr Lowe. He said from 2024:
1. The board will meet eight times a year, rather than 11 as is currently the case.
Four of the meetings will be on the first Tuesday of February, May, August and November. The other four meetings will be held midway between those meetings.
The exact dates for 2024 will be published soon and the dates for future years will be published well in advance.
2. The board meetings will be longer than is currently the case.
They will typically start on the Monday afternoon and then continue on the Tuesday morning. The outcome of the meeting will be announced at 2:30 pm on the second day, typically a Tuesday as is the case now.
3. All board members will have the opportunity to attend an internal staff meeting some time before the board meeting.
This will allow them to hear directly from, and ask questions of, a broader range of RBA staff.
4. The post-meeting statement announcing the decision will be issued by the board, not, as is currently the case, the governor.
5. The governor will hold a media conference after each board meeting to explain the decision.
The media conference is expected to be held at 3:30 pm.
6. The quarterly Statement on Monetary Policy will be released at the same time as the outcome of the board meeting (in February, May, August and November), rather than on the following Friday as is currently the case.
Given this and other changes, the RBA says it is reviewing the structure of that document.
7. 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.
The new statement is expected to be finalised later this year.
8. The board will oversee the bank's research agenda as it relates to monetary policy and aspects of financial stability.
9. The bank will continue with its current approach to climate change analysis, focusing on the implications of climate change for the economy, inflation and the financial system.
10. The board will work with Treasury to undertake five-yearly open and transparent reviews of the monetary policy framework.
"The less frequent and longer meetings will provide more time for the Board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication," Dr Lowe said.
"Likewise, the staff will have more time for analysis, with less time spent preparing summaries of recent developments. The Board will also be able to hear directly from more staff and have greater opportunity to request work on particular topics.
"And the post-meeting media conferences will provide a timely opportunity to explain the Board’s decisions and to answer questions. This will complement our existing communications, including through speeches with Q&A.
"Together, this is a significant package of reform that will contribute to better decision-making and communication," he said.
More changes to come
Dr Lowe said the RBA Review had also made a number of other recommendations that, in the Board’s view, were best considered after the legislative process has been completed and the new Monetary Policy Board is up and running.
"This will avoid the current Board locking the new Board into a particular approach," Dr Lowe said.
These recommendations relate to:
- The publication of an unattributed vote count to show how RBA board members voted
- All board members making regular public appearances to discuss their thinking and decisions on monetary policy
- The establishment of an expert advisory group to engage with the Board
- Board papers being published with a five-year lag
Response to RBA review, and cultural change within the bank
The changes to the way the bank's board operates have been made in response to the RBA Review, which was released in April.
Dr Lowe said the board had spent time in recent meetings discussing the recommendations.
He said the review had also recommended improving the culture within the bank, to ensure that it is an open and dynamic organisation.
He said the board had taken those recommendations on board and was "embarking on a significant program of cultural change with these objectives in mind."
"The review panel identified opportunities for us to further empower our staff, provide stronger leadership, create a more open culture that encourages constructive challenge, and make greater use of the staff's technical skills," he said.
"This all makes a lot of sense and is consistent with changes we have been making over recent years."
How long will Lowe remain governor? Travelling to G20 next week
Meanwhile, speculation continues about the likely end-date for Dr Lowe's term as RBA governor.
Treasurer Jim Chalmers said on Wednesday that federal cabinet would meet soon to discuss the future of Dr Lowe, whose term ends in September.
"There'll be a cabinet discussion before long about it. And then ideally, I would make an announcement immediately after that," he told ABC radio.
Federal parliament doesn't return from its winter recess until the final day of July.
If Mr Chalmers wanted to make an announcement about Dr Lowe's future before parliament returned, a cabinet meeting would have to be convened beforehand.
But Mr Chalmers has also confirmed that Dr Lowe will travel with him to India next week for a meeting of the G20.
"He and I will work closely together to represent Australia's interest in that forum and also to make our contribution to the big global conversation about how we safeguard our economies from inflation," Mr Chalmers said.
On Wednesday, Dr Lowe also reiterated that the RBA board could lift interest rates again if it thought it necessary.
He said the decision to keep the cash rate target on hold this month — at 4.1 per cent — would give the board time to assess the state of the economy and outlook.
He said at its next meeting, the board would have an updated set of economic forecasts from RBA staff and a revised assessment of the balance of risks.
"The board will also have new readings on inflation, the global economy, the labour market and household spending to help inform its decision," he said.
"It is a complex picture and there are significant uncertainties regarding the outlook."