Reviews on state institutions are conducted, among others, to enhance systems of good governance with the intent to augment outcomes, installing confidence and trust in public institutions to better manage risks and drive change. With political backing, the Australian Federal Government undertook a comprehensive review of Reserve Bank of Australia (RBA’s) operations in 2023 on the theme of “an RBA fit for the future”, the first since its current approach to monetary policy in the 1990s, identifying more clear and well-defined roles and responsibilities. The legislative changes are expected to take effect on 1 July 2024.
State institution reviews aim to boost governance systems, instil confidence, and drive positive change. In 2023, the Australian Federal Government undertook a thorough review of the Reserve Bank of Australia (RBA), focusing on the theme of a future-ready RBA. This marks a significant shift since the 1990s in RBA’s monetary policy approach, aiming for clearer roles and responsibilities. Legislative changes resulting from the review are expected to take effect on 1 July 2024.
Context
Of late, demands on state institutions have mounted, requiring reviews and subsequent reforms to adapt to changes in operating in a complex and highly uncertain global environment. What about similar institutions in the region—are such reviews due? What are some lessons that can be drawn to improve efficiency and accountability as “high-performing institutions” to coin a phrase from the RBA review? Against the backdrop of existing challenges in the efficacies of financial systems in the region, albeit with growing work in this area, there are greater motivations to undertake reforms to improve performance during these unprecedented times.
Key lessons
A strategic place to start is by appointing expert board members who are proficient in providing independent critiques and robust contributions to decision-making. The RBA, recognising the value of qualified expertise, aimed for a process fostering greater idea contestability. Central banks demand accountability from the institutions they regulate, a principle reciprocated through transparent legislation governing appointments. While the Pacific region may face challenges in candidate availability, implementing legislation to safeguard the appointment process from undue influence is crucial, accompanied by clear role and responsibility definitions.
Clear communication is paramount, exemplified by the RBA’s establishment of a dedicated structure for this purpose. Effectively conveying policy matters to the public is critical, and the importance of articulating these messages for enhanced public confidence and trust cannot be overstated.
Regional institutions can be inaudible, especially on contentious policy issues, and may hesitate to participate in public discussions. Overreliance on official policy documents, often outdated post-dissemination, is observed. Embracing open and candid public conversations validates feedback, fostering a more robust approach to good corporate governance.
In parallel, there is also a greater need for upskilling of technical staff capacity to handle the growing responsibility and burden of providing sound and credible advice. Perhaps for the region, capacity building is often diluted on the list of priorities. It is encouraging, that there is now a growing suite of opportunities in this space to work in collaboration with higher learning institutions at home and abroad.
Engaging a diverse range of stakeholders, as done by the RBA through academia, think tanks, international financial institutions, experts, and the public via workshops and surveys, is crucial during reforms. While the region may not be able to replicate such an exhaustive process, the intention is vital for crafting a genuinely home-grown policy that aligns with people’s needs and adheres to international best practices.
The challenge
To take another leaf out of the ‘RBA review’ book, road maps to implementing changes, with clear timelines and accountabilities should be in place to ensure objectives are met, long after such reviews are legislated and undertaken. This can only be achieved, with clearly defined policy frameworks and objectives at the outset, and the process of how to go about achieving it. The question remains, how often should such reviews be undertaken, and when? And should they be driven by the desire to change from within, to reflect the change in times, or under external duress to meet certain political mandates?
Mark Ofoi is undertaking a PhD in Economics at Griffith University and is a Senior Economist at the Bank of Papua New Guinea.
The views expressed in this article are those of the author(s) and do not necessarily represent the position of the above-mentioned institution. For more information about Pacific island economies, visit Pacific Island Centre for Development and Policy Research.
