Review of RBA suggests board lose ability to set interest rates
The biggest shake up of economic governance in Australia in decades follows a year of consecutive interest rate hikes
The biggest shake up of economic governance in Australia in decades follows a year of consecutive interest rate hikes
The RBA board is likely to be stripped of control to set the cash rate, under review recommendations expected to be announced today.
Treasurer Jim Chalmers last year called for a review of the RBA board’s decision making processes, which have seen 10 consecutive interest rate rises since May 2022, as well as the way information is conveyed to the public.
The independent review undertaken by three experts is understood to have recommended setting up a Monetary Policy Board to set interest rates and a separate Governance Board in a shake up described as the biggest in a generation. Rather than focusing on interest rates, the report has said the RBA board should instead look to the operation of the bank as its main purpose. Meetings to discuss the cash rate will be reduced from 11 per year (there is no meeting in January) to eight. The report also recommended that the governor of the RBA appear at a press conference after each meeting the better explain its decisions to the public.
Deloitte Access Economics partner Chris Richardson has backed the decision. His support follows comments in a Deloitte report earlier this week describing recent interest rate rises as ‘unnecessary’, as they placed further pressure on mortgage holders.
The RBA Board has repeatedly referenced high inflation as its reasoning for continuing to increase the cash rate, which lead author and Deloitte Access Economics Partner Stephen Smith said had left the Australian economy ‘finely poised’.
The decision to shift decision making from the RBA board to a separate board is in line with the modus operandi of other central banks around the world, including the UK and Canada.
The recommendations follow a tough year for mortgage holders, which have seen rates rise by 3.5 percent since April 2022. This is despite RBA governor Philip Lowe telling borrowers in 2021 that rates would remain low until ‘at least 2024’.
Prime Minister Anthony Albanese has called for bipartisan support for the recommendations.
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After more than a year, prices have finally levelled out in prime central London, while outer London saw a small uptick in high-end prices from the previous quarter
The first quarter of the year brought some long-awaited signs of recovery in London’s luxury housing market, offering the first positive quarterly price growth since September 2022, according to a report from Savills on Wednesday.
After six consecutive quarterly price falls, luxury home prices in central London levelled out in the first three months of the year, with a 0.1% quarterly uptick in prices. The £3 million to £5 million (US$3.79 million to US$6.32 million) market saw a slightly larger increase of 0.3%.
Outer London’s luxury market saw greater quarterly price growth, with home prices up 0.8%, as some stability returned to mortgage costs and lured more buyers back to the market, according to the report.
All of this is evidence that the market is “in early stages of recovery,” according to Lucian Cook, head of residential research at Savills.
“The outlook for the housing market has certainly improved, partly because the mortgage market has recovered more quickly than expected,” Cook said in the report. “With the first rate cut rapidly coming into view and recessionary risks easing, greater stability has returned to the cost of mortgage debt, which has positively impacted domestic prime markets, where many buyers rely on borrowing, most notably in leafy outer prime South and West London, as well as the commuter belt.”
Outside of London, prices across the U.K. saw no quarterly growth heading into the beginning of the spring market, which is expected to bring higher levels of buyer activity in many regions.
Suburban regions saw prices dip just 0.1%, while urban areas—like Edinburgh and Glasgow in Scotland, and Bath and Oxford in England—saw prices increase by 0.6%.
Cook said regional buyers are more likely to be concerned about market uncertainty than London buyers in the lead up to the general election.
“As a result, buyers are still expected to be less committed until the dust has settled,” he said.
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