(19 August 2011 – Australia) Outgoing Reserve Bank (RBA) board member Warwick McKibbin has told The Australian that with a majority of business leaders on the central bank board, tough decisions on inflation may not be made.He said the business members had provided valuable intelligence on the economy during his decade on the Reserve Bank board. They had ‘made their position clear’ amid the board’s ‘robust discussion’.
‘I think in a sense it has been good luck that the people who have been on this board during this period all have been outstanding,’ he said. ‘But can you always guarantee you will always have quality people?
‘What if you need to raise rates at some point and it is going to cause a few problems for certain sectors of the economy and the business community thinks it is going to be a problem?’
The call from the Australian National University economics professor comes amid widespread business complaints that the non-mining economy is being crunched by the Reserve Bank’s 4.75 percent cash rate and the strong dollar.
The nine-member board includes two professional central bankers – Mr Stevens and his deputy, Ric Battellino – along with Treasury secretary Martin Parkinson.
Unique among the world’s central banks, the majority is held by five business members: former finance executive Jillian Broadbent; Fairfax Media chairman and former Woolworths boss Roger Corbett; BlueScope Steel chairman Graham Kraehe; former Woodside Petroleum chief executive John Akehurst; and BG Group’s Australian head Catherine Tanna.
Wayne Swan last month broke the board’s 50-year tradition of also including a prominent academic economist.
He replaced Professor McKibbin, whose second term expired on July 30, with one of his and Paul Keating’s former advisers, John Edwards, who also has been Australian chief economist for HSBC Bank.