There is a new government in town and its treasurer, Jim Chalmers, is going to do a review of the Reserve Bank of Australia.
News of the review has been around for some time, with the idea of the first review of Australia’s central bank in 30 years already being spoken about just after the May 21 federal election.
It bobbed up again this week, with the suggestion that RBA governor Philip Lowe had misgivings about a review into the central bank’s operations.
Lowe then told a subsequent media conference that the review would be an opportunity to learn.
So there has been a bit of a fuss and debate about the review and whether Lowe approved of the idea or otherwise.
This might fascinate some parts of the political world but frankly, what the governor thinks or does not think about a review is immaterial to the question of whether a review is necessary.
It should actually not matter what regulators or institutions – and those who run them – think of the entities being suggested for review, because reviews are a part of a risk management process and they are needed.
Prudent risk management would dictate that reviews on a periodic basis should be conducted to ensure that organisations are functioning as intended.
A review may also make suggestions for improvement or changes to a structure in order for it to perform functions better.
It does not mean that a review is necessarily a threat to a senior office holder’s job. Nor is it necessarily something to be feared.
Regulatory bodies need reviews in the same way that cars need a service. Checking the oil filters, brakes, and other components is necessary to ensure things are in good working order.
Regulators and similar bodies are the same. Are they fulfilling their role properly? Do they have any structural issues that need addressing?
Has there been any adverse commentary from the Australian National Audit Office on an entity that is yet to be acted upon? What, if anything, are the newly emerging areas that need to be incorporated into the remit of a body to ensure it remains ‘roadworthy’?
Anyone familiar with corporate-governance practice will know that risk-management frameworks will typically require a periodic review to ensure processes and procedures are functioning properly.
It is entirely appropriate that a government review of the RBA take place and for this to lead to reviews of other government entities.
No individual body should regard itself as being above a review, even if it is independent of a government in its decision-making. Taxpayers deserve to know whether an organisation they fund is operating appropriately and whether there are ways of ensuring improvements in processes.