By James Glynn


SYDNEY--One of the architects of a recent review of the Reserve Bank of Australia's operations said proposed changes won't undermine the power of the central bank governor, in response to claims that they would put critical decisions into the hands of part-time board members.

Academic Renee Fry-McKibbin, who was part of a three-person panel appointed by Treasurer Jim Chalmers to undertake the review, said in a written article Friday that misinformation on the matter is circulating and needs to be corrected.

The review of the RBA, conducted between July 2022 and March 2023, made 51 recommendations, which Chalmers is now considering. It recommended establishing a dual-board system for the RBA, with one dealing with policy decisions, while the other focuses on governance matters.

Claims that the changes would erode the power of the RBA governor emerged this week when former RBA Gov. Ian Macfarlane called the changes "very bad policy" and said the recommendations should be subjected to further public scrutiny.

Macfarlane said that under the proposed reforms, the policy-setting board would be dominated by the presence of six part-time academics, who would have twice the voting power of the governor, the deputy governor of the RBA and the Treasury secretary.

The skewed balance of power might see the wishes of the RBA rejected by the part-time board members, adding to uncertainty around the direction of interest rates, Macfarlane said.

"People have been led to believe that the proposals are moving the Reserve Bank of Australia toward some sort of world's best practice. That's not the case," Macfarlane said in a television interview on Wednesday.

But Fry-McKibbin argued that the proposed board changes will leave in place a system that is virtually unchanged from what is currently in place.

"Our recommendations would not involve handing power to outsiders, as some commentators have claimed. In fact, the changes don't deviate too much from what is already in the legislation," she said.

Macfarlane said the existing board structure has traditionally acted more like an "advisory" committee and less like a voting board, allowing the governor and bank insiders to retain control of monetary policy.

Just-departed Gov. Philip Lowe said earlier this month that the proposed model is "exactly" the same as the model the RBA has had for 60 years, Fry-McKibbin said.

The RBA board members have always voted on decisions and the new arrangements don't change that, she said.

What the proposed changes do is better enable the external members to deliver responsible monetary policy by ensuring they have expertise in things such as macroeconomics, the financial system and labor markets, she added.


Write to James Glynn at james.glynn@wsj.com


(END) Dow Jones Newswires

09-22-23 0338ET