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Josh Frydenberg will consider Reserve Bank review after OECD recommendation

Labor leader Anthony Albanese said the bank and governor Philip Lowe had played an outstanding role in dealing with the economic fallout from the pandemic.

“[But] I think no institution is above ongoing review. I think the RBA does a very good job here in Australia,” he said.

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“But we need to constantly look at our institutions and make sure that if any improvements can be made, that they are made.”

Senior economist with the Committee for the Economic Development of Australia, Melissa Wilson, said it was undeniable the RBA had failed to meet its own targets over recent years.

Ms Wilson, who has worked at the RBA, said other central banks had undertaken extensive reviews in recent years, adding there was nothing to fear from a proper inquiry.

“A review could show that the bank has acquitted itself quite well and there is nothing that needs to change. But it could also recommend changes that improve its operation,” she said.

“Carrying out a review doesn’t mean the Reserve Bank is doing anything wrong, but you can’t avoid the fact it missed its key inflation target before the pandemic.”

Economic policy director at the Grattan Institute, Brendan Coates, said Australia was already a global outlier as most of the RBA’s international counterparts had recently completed reviews of their operations and mandates.

He said the bank’s recent performance had been poor with its own forecasts suggesting little change amid the pandemic.

“Even before COVID-19, the unemployment rate was nearly a percentage point higher than the bank’s estimate of full employment. Most Australians haven’t had a decent pay rise in years,” Mr Coates said.

“The Reserve Bank is forecasting that wages will start growing faster by 2024. By then we’ll be talking about a lost decade as far as Australians’ living standards are concerned.”

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Former Treasury analyst and current assistant professor of economics with George Washington University, Steven Hamilton, said it appeared the only organisation against a review of the RBA was the RBA itself.

He said a foreign expert in monetary policy plus representatives with academic, Reserve Bank and financial market experience should form the heart of an open, transparent review.

“The RBA has for too long been seen as untouchable by successive governments, by journalists, and by the Sydney business establishment,” he said.

“The cost of that complicity is hundreds of thousands of livelihoods. As they say: sunlight is the best disinfectant.”

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