Australia’s incoming central bank chief Michele Bullock faces a challenging initiation to the role as she moves to implement recommendations from a review of the Reserve Bank, former Governor Bernie Fraser said.
Treasurer Jim Chalmers said Friday that Bullock would replace Governor Philip Lowe when his term expires on Sept. 17. Chalmers said while he had great respect for Lowe, Bullock is the “best person to take the bank into the future.”
Fraser, who helmed the RBA from 1989-1996, warned it would be a difficult first six months for the new governor. The reason is that she will need to make a start on implementing 51 recommendations from a review of the RBA, while bringing inflation under control and preserving the bank’s independence.
The recommendations include establishing a separate monetary policy committee, board members making regular appearances to discuss the economy and press conferences after each rate decision, among others.
The review is like a “cluster bomb,” said Fraser, who set the 2-3% inflation target and laid the ground for RBA independence, formalized by his successor.
“It’s got lots of little bits and pieces in there that have already fallen out of the sky and they’re lying dormant,” he said after Bullock was named the next governor. “But they’re potentially difficult for the bank and for the country.”
Some of the changes are going to require amendments to the bank’s underlying legislation, the 1959 Reserve Bank Act, opening up the possibility of horse-trading between political parties. Lowe, prior to the review, had worried about the threat of unexpected changes arising from altering the Act.
Chalmers has sought to avert those risks by enlisting the support of the main opposition Liberal Party to avoid minor parties becoming involved.
Fraser said he was angered by some of the criticism directed at Lowe by lawmakers, including the Australian Greens, who hold balance of power in the Senate. Some Greens senators had demanded Lowe be dismissed and that parliament use reserve powers to reverse interest-rate increases.
“It’s going to be a pretty challenging time for the treasurer and for Michele, I think, to get through that in a way that doesn’t impinge upon the independence of the bank,” he said.
“You don’t have independence without credibility or credibility without independence,” Fraser added.
