Former RBA board member deems political intervention dangerous

Former Reserve Bank of Australia (RBA) board member professor Warwick McKibbin, says it is dangerous and unfortunate that the central bank has to deal with the politics of interest rates.

McKibbin, who is now the director of Australian National University’s (ANU) Research School of Economics, was commenting on the government’s argument that delivering a budget surplus would make it easier for the RBA to cut the cash rate.

“There’s a lot of pressure being placed on the bank externally but also, I imagine, internally as well from other board members,” McKibbin told Network Ten on Sunday.

He said the central bank’s independence must be respected.

“I think its independence is the reason that we’ve done so well over the last decade or so,” he said.

“It’s quite dangerous to be speculating that the bank should move if the government changes policy.”

McKibbin repeated his calls that the RBA should take on more economic experts, rather than representatives from the business community.

McKibbin holds a PhD in economics from Harvard University and received first class honours in economics from the University of New South Wales and has been a senior fellow of the Brookings Institution in the US since 1993.

He was a board member of the RBA from 2001 to 2011.