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The Reserve Bank of Australia keeps making the wrong decisions because 'part-time amateurs' are making calls on interest rates, a former bank insider says.
Borrowers are widely expected to cop another 50 basis point rate increase on Tuesday, adding to the May, June and July increases that have been the steepest since 1994.
This would see someone paying off an average $600,000 mortgage cop a $169 increase in their monthly mortgage repayments, as the cash rate rose from a three-year high of 1.35 per cent to a six-year high of 1.85 per cent.
This is occurring despite RBA governor Philip Lowe repeatedly promising last year to keep the cash rate on hold at a record-low of 0.1 per cent until 2024 'at the earliest'.
Peter Tulip, who was the RBA's senior research manager from 2011 to 2020, said the central bank board, with business leaders, lacked the gravitas to challenge Dr Lowe on flawed decisions.
'Other central banks have monetary policy decisions made by stars of the economics profession - we have them made by part-time amateurs,' he told Daily Mail Australia.
'I was unhappy with the way the Reserve Bank was doing its job, I didn't think it was doing a very good job.'
Dr Tulip, who is now the chief economist with the Centre for Independent Studies think tank, said the RBA board needs experts at macro-economic measures.
'They don't have the training to say to Phil Lowe, "But hold on, governor, doesn't the research say the opposite to that" or "Why are we doing this when the Bank of England is doing the opposite?" or even "What's the evidence for that?"
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'These are the sorts of questions that are difficult for people without specialized expertise to ask.'
Warwick McKibbin, who served on the Reserve Bank board from 2001 to 2011, said too often, that appointees represented sectional interests instead of being economic experts, which compromised decision-making.
'If it's made public, then they're going to be shown potentially arguing against their own interests,' he told Daily Mail Australia.
'For example, if you had a unionist on the board, and they knew that if they raised interest rates, people would lose their jobs in their industry, they're likely not to go public with it.'
Professor McKibbin, now the director of the Australian National University's Centre for Applied Macroeconomic Analysis, said the Reserve Bank should publish the individual views of each board member at each meeting to give borrowers a better idea of interest rate decision-making.
'The debates around the board should be completely open and transparent,' he said.
'When I was on the board, I disagree a number of times but it was never made public and no one ever knew.
'That needs to be opened up and you need to see what the debates were, particularly this time around, when we had the response to Covid - it should have been on the table what the disagreements were and the decision of when to start raising interest rates.
'I doubt it could have been a consensus to wait as long as they did.'
One-time Coca-Cola Amatil CEO Alison Watkins was appointed to the RBA board in December 2020 for a five-year term when she was still earning $2,178,652 a year as the head of the soft-drink bottling company.
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Ms Watkins was last year paid $45,641 to attend five board meetings plus another $4,982 to sit on the RBA's audit committee. Ms Watkins was only required to attend fewer than half the RBA's 11 monthly board meetings. Source: MSN
