Critics circle RBA ahead of exam
“Central banks are inadvertently directing resources towards lower value activities, which distorts prices and risks,” he said.
“When capital flows into bad bets and moves away from safer bets, we all suffer the consequences. Monetary easing effectively subsidizes business activities that are not socially desirable (but are profitable privately) to the detriment of preferable investments. All of this looks very bad for dynamic efficiency and capital formation over time. “
The RBA agreed last month that ultra-low interest rates were one of the factors behind the influx of money into cryptocurrencies, providing higher returns to investors than other forms of investment. more traditional.
Mr Tulip, who left the RBA last year, used a separate document in Agenda to assert that the Reserve had focused on stabilizing household debt rather than reducing unemployment and keeping inflation within its target range of 2-3 percent.
The bank had halved the official cash rate in the second half of 2019 after unemployment and underemployment remained stubbornly high. It has not hit its inflation target for more than five years.
Mr Tulip said the bank’s policy failures were due to its structure, a fear of transparency and a board structure that, without monetary policy expertise, was unable to challenge the policies. senior management perspectives.
“The RBA has a record of bad decisions. This partly reflects a poor process and a lack of expertise. More fundamentally, the RBA has a culture that places a low priority on getting the right answers, ”he said.
“He has a culture in which the formatting of graphics receives more attention than the political framework.”
Mr Tulip said the bank should provide more detailed explanations of its decisions, including the release of projections for interest rate movements and regular press conferences by the governor.
He said that given the importance of the political parameters of the RBA to the economic well-being of the whole country, there must be a higher level of accountability for the institution.
“We already demand that administrative and judicial decisions be explained in a way that facilitates review and appeal,” he said.
“We should have higher standards for monetary policy, given that it affects millions of households and the RBA has a large staff to draft it. Controls on bureaucratic discretion should be stricter for central banks than for other institutions. “