1. Central banks are inherently political institutions. They build public consensus for their policy framework and decisions; they shape the values and the benchmarks by which they want the public to evaluate them; and they shape their legislative/regulatory environment.
2. The RBA’s recent introspection must be judged within this frame. The Bank’s unusual willingness to concede error and provide “critical” internal evaluation of pandemic programs does not reflect a now penitent institution, seeking to make amends and lasting reform.
3. Rather the Bank seeks to manage the politics of the RBA Review, attempting to forestall criticism, changes to its mandate, and, critically, changes to the way in which we hold the institution to account.
4. How else can we interpret the Bank grading its own homework with alacrity, to wit the reviews of the yield control program, the bond purchase program and soon the Bank’s flirtation with forward guidance.
5. How else can we interpret public statements that forecasts were “embarrassing” and the Governor’s recent keen interest in the academic panel?
6. After all, the academic panel commenced in 2019, an initiative of the current Head of Economic Research, John Simon. Embraced by then Deputy Governor Guy Debelle, the Governor declined to attend, and did not participate in subsequent meetings.
7. Until September this year. With a press release: “see, we talk to all kinds of people, even academics!”
8. The Bank has repeatedly questioned the need for a review of the Bank’s monetary policy function, arguing variously that it simply was not required, could be done internally, or, under sustained pressure, ideally would be apolitical, every five years.
9. I hope I am wrong about these concessions and that they do in fact signal genuine change. But they as likely reflect the Bank’s astute understanding of the reality they face. If so, we can only hope the Treasurer and the Review sees this for what it is: politics.
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