Fed: Gerard shows flaw in RBA appointment system: Macfarlane =2

AAP General News (Australia)
02-17-2006
Fed: Gerard shows flaw in RBA appointment system: Macfarlane =2

Later, Mr Macfarlane said that while there had been calls for changes to the overall
make-up of the Reserve Bank board, other central banks were moving towards the Australian
model.

He said the Bank of England's two latest appointees were not specialists in monetary
policy or economics.

Australia was unusual in that it did not have a board filled with specialist economists,
but overseas boards with this sort of make-up operated differently to the Reserve Bank.

"Most countries that have a board have people on it who are normally specialised economists,
but most of these people (are) nearly also always full-time," he said.

Mr Macfarlane rejected suggestions that business people on the board had inside knowledge
that gave them an advantage over their competitors.

He said board members got their agenda on the Thursday night ahead of the following
Tuesday's meeting.

There had been no cases of people acting on that information.

Mr Macfarlane said a well-trained economist would have as much idea of the Reserve
Bank's movements on interest rates as a board member.

"I don't think they would have a better knowledge than a well-informed economist who
has no connection to the Reserve Bank," he said.

"They appreciate the general economic briefing they get, and they find that very valuable.

"(But) apart from that period between when they receive the board paper and the board
decision, I don't think they have any better understanding of how monetary policy is going
to evolve over the rest of the year, for example, than a well-informed economist who follows
the economy and the indicators and the debate and who is totally independent of the Reserve
Bank."

AAP sw/apm/sd

KEYWORD: RBA GERARD 2 CANBERRA (REOPENS)

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