Australia to review central bank’s monetary tools, rate forecasts

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FILE PHOTO: Two women walk next to the Reserve Bank of Australia headquarters in central Sydney

SYDNEY – Australia will launch a review of the Reserve Bank of Australia’s (RBA) inflation target, monetary tools and board structure, Treasurer Jim Chalmers said on Wednesday, amid criticism over the central bank’s interest-rate policies.

“Now is the time given all of the near-term economic challenges we have got, some of the longer-term complexities we’re dealing with as well … to have a proper look, an independent, external expert look, at our Reserve Bank,” Chalmers told Australian Broadcasting Corp. television.

The RBA has come under scrutiny for undershooting its 2-3% inflation target for much of the last decade, and more recently giving forward guidance during COVID-19 that rates were not expected to rise until at least 2024.

In a bid to tame surging inflation, the RBA has instead raised interest rates for three months in a row, taking them to 1.35%, and a further hike is expected in August.

“The breadth and depth of the expertise and experience on the RBA board is of interest to me, the inflation targeting regime, its objectives and mandates, its governance, the way it sets itself up,” Chalmers said.

Canadian central banker Carolyn Wilkins, Australian National University economics professor Renee Fry-McKibbin and former Treasury official Gordon de Brouwer will conduct the independent review, media reports said, citing Chalmers.

Chalmers told ABC he had “three absolutely top-shelf high-calibre people” to lead the review.

“(They will) make sure that we have got the best set of arrangements and if there’s a better way to do it, let’s hear about it,” he said.

(Reporting by Renju Jose; editing by Richard Pullin)