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Posted: 2024-02-21 20:47:12

Professor Renee Fry-McKibbin was one of the experts who reviewed the RBA.

She is now appearing before the committee, along with fellow reviewer Dr Gordon de Brouwer.

Professor Fry-McKibbin has run senators through the list of things that some previous witnesses have spoken about today.

In her opening statement, she only briefly mentioned the hot topic of the overrule power, which she has recommended be stripped from the Act.

She said "the parliament is sovereign" and it could always overrule the RBA in the future (we're assuming, here, that the overrule power has already been stripped from the Act) by amending the Act again.

Dr Gordon de Brouwer said he thinks it would be better for parliament to override the central bank, rather than the executive government, and the current arrangements give too much power to executive government.

Liberal senator Andrew Bragg wants to know how the government of the day, in a world where the overrule power has been stripped from the Act, could prevent the RBA from going rogue and lifting interest rates to 20%.

Dr de Brouwer says the elected government, in that situation, could reflect its concerns in a new bill that it could try to pass through parliament. He says the changes he has recommended making to the RBA's governance would make the RBA a "highly competent" organisation where it was even less likely to go rogue.

Senator Bragg wants to know if they think the RBA is independent now, even though Section 11 is in the Act. Dr de Brouwer says it is independent.

Liberal senator Dean Smith wants to know if the reviewers can name any people, as equally esteemed as people like Peter Costello, Ian Macfarlane, and Bernie Fraser, who are arguing for the overrule power to be stripped from the Act.

Professor Fry-McKibbin says Professor Andy Levin from the US wrote an in-depth paper on this point. She said there's also a lot of academic work looking at the inflation shocks of the 1970s which found that the more independent central banks are, the better they performed in that period.

Greens senator Nick McKim says he's struggling to understand where this recommendation to dump the overrule power from the Act has come from. He says current RBA governor Michele Bullock is "agnostic" on the idea, and we've just heard from former RBA governors Ian Macfarlane and Bernie Fraser, and Peter Costello, that the power should not be stripped from the Act.

Dr de Brouwer says it wouldn't be the end of the world if the power stayed in the Act, but he has still recommended dumping it.

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