Central banks need to be brought under the control of Parliament.
“The whole remit for central banks only makes sense if it has social support and public support and ultimately through this parliament and people like you. The moment that support is not there, central banks do not and should not have a role because we are unelected officials with enormous power.”
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These were quite refreshing remarks from the Deputy Governor of the RBA.
It does beg the question why isn’t the RBA Governor elected by the people and if he/she isn’t elected then shouldn’t the RBA be accountable to the people via the parliament who is elected?
I’m pretty sure if a poll was to be taken as to whether or not Central Banks still had public support after the Covid debacle the answer would be no.
Which begs the question should central banks even exist?
My view is no, especially since the RBA refuse to release minutes of meetings with other central banks.
No accountability and no transparency is not very democratic.
Furthermore, there is no evidence that making the RBA independent has led to better outcomes. In fact I would argue the opposite.
Economics Legislation Committee
27/02/2025
Estimates
TREASURY PORTFOLIO
Reserve Bank of Australia
Senator RENNICK: Mr Hauser, I know that you are new to the RBA. Have you got an opinion on the management of policy through the COVID period, when the RBA panicked, literally dropped interest rates to 0.1 per cent, printed $300 billion to pay people to stay at home and get brainwashed by the premiers and then jacked interest rates up 13 or 14 times in about 18 months? It was hardly a measured response, was it?
Mr Hauser : I hesitate to give a detailed answer to policy decisions that I wasn’t studying closely. I do recognise, maybe removing some of the extremes, the story you describe. Many central banks had the same experience. Whether it was—
Senator RENNICK: They created the experience, didn’t they?
Mr Hauser : It’s an absolutely fair challenge that in retrospect some of the policy decisions that were made, not just in Australia but elsewhere, may have had consequences for the outlook. I think it was not easy to know that at the time.
Senator RENNICK: I did. I posted the other day text messages I sent to Minister Cormann at the time, the Treasurer Josh Frydenberg and the Prime Minister. I said that we were going to cause inflation for the next decade, but I was ignored. Do you think really the whole concept of the RBA being independent is nothing but a smokescreen and that, at the end of the day, the RBA is a puppet of the politicians? It should be, by the way. I actually think the RBA should report to parliament. But I think the whole independence—
Mr Hauser : As we do. I think you have put your finger on the challenge. Independence cannot mean you are operating in isolation from society. The whole remit for central banks only makes sense if it has social support, public support and ultimately through this parliament and people like you. The moment that support is no longer there, central banks do not and should not have a role, because we’re unelected officials with enormous power. That is why the act sets out our powers. As you know, the statement of the conduct of monetary policy can change, as we were discussing earlier. It sets parameters for our operations that are set by politicians and, ultimately, by you. I completely agree with that. I think we must be accountable and we must explain ourselves. Any right we have to set policy is contingent on doing a good enough job.
