RBA restructuring takes shape
Following the release of a wide-ranging review of the Reserve Bank of Australia (RBA) in April, after which the central bank accepted all the 51 recommendations made, more details on what the board will look like in this next chapter have emerged.
In a press conference on 12 July 2023, current RBA governor Philip Lowe announced that beginning next year, the board will henceforth meet eight times a year. This is a reduction from the current 11 meetings held annually.
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 these meetings with results announced on a Tuesday, as is currently the case.
The board’s meetings will be longer, starting on a Monday and continuing on the Tuesday morning before an announcement is made at 2.30pm. They will then be followed at 3.30pm by a press conference to explain the decision making that has gone into the current monetary policy. The governor will hold the press conference, but the statement on monetary policy will be issued by the board as a whole, rather than solely from the governor.
In addition, 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.
In a year when Dr Lowe has borne considerable public scrutiny for the RBA’s decisions, as Australians grapple with cash rate rises that have significantly increased the cost of their mortgages, it’s clear the new model is designed to reposition the bank’s decisions as the work of a group, rather than the person at the top.
It’s prescient future planning, given that while the cash rate held steady at the last meeting, Mr Lowe signalled that more rises might be in store in the future, citing pressures such as skyrocketing rents, among other reasons why inflation is not yet where the board would like it to be.
In his press conference on Wednesday, Mr Lowe spoke to a number of other recommendations included in the April report, explaining that their implementation would be considered when the central bank undergoes one of its biggest changes, introducing a second board to split decision making into governance and monetary policy.
In addition, the alterations taking place now and in the coming months will set a standard for the institution, as Dr Lowe also announced that the board’s structure will undergo review once every five years to ensure the monetary policy framework is fit for purpose.
Finally, the governor discussed the issues that were levelled against the body as a workplace. According to Dr Lowe, the bank had embarked on “a significant program of cultural change,” intended to “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.”
The RBA will be implementing a “comprehensive 360-degree feedback process for all senior leaders” while exploring “deeper and more consistent leadership training.”
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