The unveiling of the independent Review of the RBA – “An RBA fit the future” – has received much attention with talk of a radical overhaul of the RBA. However, there is a real risk in grossly exaggerating the problem and undertaking a big change at the RBA with unclear benefits. In particularly there is a danger in assuming the approach employed by some foreign central banks must be better than our own.

RBA “mistakes”

Since the middle of last decade its often thought that the RBA made three key “mistakes” and these are covered as “episodes” of concern in the Review.

1. Arguably running monetary policy too tight in the years ahead of the pandemic such that inflation was below target at the same time that underemployment was high and wages growth very low.

2. Arguably providing too much stimulus to the economy through the pandemic. This included the 0.1% target for the three-year bond yield and forward guidance that it did not expect conditions to be met to raise interest rates until 2024 at the earliest.

3. And arguably being initially too slow to start removing monetary stimulus in the face of rising inflation from 2021.

Some may add another two.

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