pn602. Reserve Bank centre of a political storm

The Reserve Bank has found itself at the centre of an unlikely political storm, with politicians of all persuasions debating the extent to which the central bank’s independence gives it absolute freedom to set monetary policy independently

The Reserve Bank has been operationally independent since 1989, but as the economic trauma of the past decade – and in particular the past year – has pushed it to deploy more of its unconventional monetary policy tools, politicians have begun to question whether they have a right to tell the bank what to do.

That brouhaha came to a head on Monday, when the National Party’s new shadow treasurer, Andrew Bayly, said the Government should write to the bank to tell it to direct some of its money printing away from the housing market. 

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