"The RBA should continue its work to understand the implications of climate change for the economy and the financial system, taking further steps to incorporate physical and transition risks into RBA analysis and modelling." RECONSTITUTE MONETARY POLICY BOARD The complex risks, overlapping responsibilities and distributed tools for financial stability demand clear accountability for the use of tools, and close cooperation between regulators." ADDRESS CLIMATE RISKS "The Review seeks a firmer foundation for the RBA’s financial stability role and clarification of the scope of its responsibilities. "To ensure that the RBA’s approach to monetary policy remains appropriate in a changing economic environment, the Review recommends 5-yearly reviews of the monetary policy framework and tools." LEGISLATE FINANCIAL STABILITY ROLE As part of this, the RBA and Treasury should undertake joint scenario analysis exercises to prepare for challenging circumstances." REGULAR REVIEWS "There should be increased information sharing between the RBA and Government on risks, scenarios and policy constraints.
RESERVATION KEYKEY FULL
This should include how quickly it is aiming to return inflation to around the midpoint of the target, its assessment of full employment, and how, if at all, financial vulnerabilities or other considerations have factored into its decision." PROMOTE BETTER UNDERSTANDING Instead, the RBA should be required to explain how it is using its flexibility. The reference to ‘on average, over time’ makes it harder to say whether or not the target is being met, limiting accountability, and should be dropped. "The current wording of the inflation target is that inflation should be between 2 and 3 per cent ‘on average, over time’. Together they require the RBA to strike a balance between controlling inflation and supporting employment, in both the short and longer term." CLARIFY INFLATION TARGETING "The RBA’s objectives for monetary policy should be clarified as a dual mandate to contribute to price stability and full employment.
Here are the key recommendations of the report: CLEARLY DEFINED OBJECTIVES The report made 51 recommendations, including moving to a clearer monetary policy framework and greater accountability. SYDNEY, April 20 (Reuters) - Australia on Thursday released its review of the Reserve Bank of Australia, the first external review of the central bank and the operation of monetary policy in four decades.
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