The Case for Reform of the Reserve Bank of Australia Policy and Communication Strategy

Abstract

At any time, the public should be able to evaluate whether the Reserve Bank of Australia's (RBA) interest rate decisions are consistent with achieving statutory mandates. The RBA's current policy and communication strategy makes this difficult. The mandates, as interpreted by the RBA, fail to provide a clearly identifiable performance benchmark. And the supporting communication strategy falls short of a commitment to explain the economic basis of why and how interest rate decisions achieve mandated objectives. Examples of both concerns are given from various public documents. Basic reforms would improve the accountability and effectiveness of monetary policy.