14th AIPEN Workshop

The 14th Workshop for the Australian International Political Economy Network will be held at The Australian National University, 6th-9th February 2024. You can read the Call for Papers here.

Here is my proposed paper that is presently under consideration:

The Mandarins of Martin Place Redux: Evaluating the Reserve Bank of Australia’s Post-COVID Monetary Policy and Transmission Shocks

Alex Burns (Alex.Burns@monash.edu), Teaching Associate, School of Social Sciences, Faculty of Arts, Monash University

Since March 2020, the Reserve Bank of Australia (RBA) has raised its cash rate from 0.1 percent to 4.35 percent (November 2023). The recent RBA Governors Philip Lowe (2016-23) and Michelle Bullock (September 2023—present) have followed an inflation targeting paradigm that has also shaped the Bernanke, Yellen and Powell era Federal Reserve central bank in the United States. The result has been macroeconomic transmission shocks that have revived debates in Australia about the long-term housing bubble, inequality, and social cohesion.

This paper makes several original contributions. It adapts a strategic subcultures framework used to study politico-military institutions and terrorist organisations to the policy study of central banks. It evaluates the efficacy and the effectiveness of inflation targeting in the post-COVID world. In particular, I highlight both long-term structural barriers in the Australian economy (higher education credentialism; human capital investment; the productivity ethos for employers and workers; skill-biased technical change; and access to finance capital for entrepreneurial investment) and novel, external geopolitical factors (including the Russo-Ukrainian War, the Israel-Hamas War, and supply chain shocks) as placing significant limitations on the RBA’s baseline model assumptions and its forecasting effectiveness.

I suggest further reform options for the RBA including more effective public communication of monetary policy and cash rate changes, and greater, more transparent academic contestability of monetary policy assumptions and transmission shock scenarios.