Structural reform of the Reserve Bank of Australia

The Reserve Bank of Australia (RBA) recently placed higher priority on stabilising household debt than on its conventional goals of unemployment and inflation. This was bad economics, bad process and resulted in substantial unnecessary hardship. However, it was not unusual. The RBA has a record of poor decisions. That partly reflects poor process and a lack of expertise. More fundamentally, the RBA has a culture that places a low priority on getting the answers right. To address these problems, more monetary policy experts should be appointed to the RBA Board, and board members should be individually accountable for their votes. The RBA should be required to be more transparent-in particular, it needs to provide detailed explanations for its decisions and it needs to show alternative projections for interest rates. Decisions should be explained and defended at regular press conferences.