Today’s Governor, Philip Lowe, joined the RBA early in his career. At its core, the RBA is a monastic institution. They keep them young, they doctrinally train them, and they keep them for decades. It’s not so much a job as it is a way of life. Expose yourself to the bright lights of the outside world and feel out of place.
This approach may work for a while in preserving the RBA’s sovereignty, but it is clearly highly corrosive to the institution (and our democracy) and politically unsustainable. Fortunately, that era seems to have come to an end.
The RBA’s myriad of problems are well ventilated. Current and former employees speak of an isolating and anti-intellectual culture, economic research departments being ignored at best and fired at worst, junior staff being stifled, and a military-style, top-down approach hostile to dissent and creativity. down culture. From the outside, the bank sometimes seemed completely oblivious to the global forefront of thinking among monetary policy experts.
If you want hard evidence, look at rates staying too high (losing thousands of jobs) and rates staying too low (fueling inflation) before the pandemic. Philip Lowe’s RBA is less risk-averse than action-averse, preferring to commit negligence rather than commission. Even if the former is worse, at least you can blame someone else.
But stronger than any solid evidence, the massive accumulation of tiny wounds collectively speaks to a sickly institution.
Unlike central banks in other developed countries, the RBA has no experts on its board. That means Lowe knows what he’s recommending better than any outside member. There wasn’t a single person in the room who could scrutinize his proposal. When asked that question, Lowe staunchly defended the status quo. No wonder!
For decades, the RBA has conducted independent monetary policy and has never preemptively launched an independent or external review of itself, in stark contrast to the numerous reviews other central banks have launched. When the idea surfaced, Lowe turned it down. When it became unavoidable, he expressed a preference for an internal review only. No wonder!
Lowe is almost never involved in rate decisions and Appears in the House of Representatives only twice a year. Unlike other agency heads, he won’t appear before the Senate estimates. Lowe only appeared last week after a motion by Sen. Nick McKim forced him to appear in person.
In fact, McKim hit the nail on the head: “Independence does not mean lack of accountability.” In fact, I think the lack of accountability destroy Sustainability of RBA independence. As one can see from the witch hunts banks have waged against themselves.
You should be angry at the RBA. Not because it’s raising rates, it has to to keep inflation in check. But because it has slowly eroded the bedrock of our economic fabric, which is responsible for all of our livelihoods.This under reviewand our dispensers who await it, must show the courage to finally do something about it.
Steven Hamilton is an Assistant Professor of Economics at George Washington University in Washington, DC, and a Visiting Scholar at the Australian National University’s Institute for Taxation and Transfer Policy.
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