The Reserve Bank governor, Philip Lowe, has rejected comments by the review panel about the workings of his board, saying the description provided in the final report “didn’t really resonate with me”.
While describing the overall review’s finding as “kind of excellent”, Lowe told a media conference on Thursday that the panel had not sat in the boardroom, and their description of the manner of the board discussions about interest rates was inaccurate.
The nine board members were “deeply engaged in the questions, [bringing] a great deal of expertise to the issues we’re dealing with”.
“They’re probing, they challenge me and sometimes I speak last in the meeting,” Lowe said. “So the idea that the board members sit there meekly, and accept the recommendation that I put to them, is very far from the reality that I’ve lived as the governor.”
Lowe’s defence of his board came as he and the RBA generally welcomed the findings of the review and its 51 recommendations. If implemented, the changes – including the creation of a specialised board dealing with monetary policy – would amount to the biggest shake-up of the central bank in about four decades.
The review panel advocated a different “skills matrix” for the new monetary policy board. As with the current one, it would have nine members – including the RBA governor, deputy governor and treasury secretary – but the six external appointees would prioritise open-economy macroeconomics, the financial system, labour economics and knowledge of the supply side of the economy.
Lowe said the current members work “very diligently and have expertise, but that’s not to say we couldn’t have a different structure”.
Lowe said he would accept an extension of his role after his seven-year term ends in September if offered.
“It is a great honour and it is a great privilege to have the job that I have, and I would also say it is a great responsibility,” he said. “If I was asked to continue, I would. If I’m not asked to continue I will find another way to contribute to Australian society.”
Guardian Australia understands review panellists did not participate in a board meeting out of concern their presence might affect the decision or behaviour of participants. They did, however, speak with all current board members, any former board members, bank governors and treasury secretaries.
The report also identified three examples where, in the panellists’ views, more information or expertise may have resulted in different decisions.
“Most people consulted by the review concluded with hindsight that monetary policy did not sufficiently support the economy between 2016 and 2019,” the report said, referring to a period when unemployment was probably left unnecessarily high.
Similarly, decisions to implement additional monetary policy tools during the Covid pandemic would have benefited from a board “with more specialist expertise, support and time to fully test the proposed policies”, it said. “Stronger decision-making arrangements may have helped mitigate eventual shortcomings in the RBA’s forward guidance, yield target, term funding facility, and bond purchase program.”
Lastly, the RBA was initially slow to respond to rising inflation in 2022, along with many other central banks. “An overemphasis on wages as a driver of persistent inflation, reliance on forecasting and modelling tools that offered limited insights on the supply side of the economy, and the way [that] forward guidance and the yield target had been designed and used all contributed,” it said.
Part of the problem was the part-time nature of the members’ roles with the board meeting for “a little under four hours” and having “limited policy discussion outside” of the monthly meeting. “At other central banks, external monetary policy decision makers commit more time to the policy process,” it said.
