OPINION: RBA’s Next Deputy Governor: Forget the Noise, Focus on Merit
- Published on
- 17 Mar 2022, 03:44 PM
(This Opinion was first published on Tuesday, March 15 at 5:05 PM as an email to premium subscribers)
By Sophia Rodrigues
(Sydney, March 15, 2022)—The Reserve Bank of Australia's next deputy governor must be a person who has the skills and the experience to meet the current requirements of the role.
Leaning towards a female candidate or an external candidate just to appoint the first female deputy governor or an outsider at a senior role would be compromising on merit. No central bank should make such compromises.
CB-Intel is not suggesting the next deputy governor should not be a female or an outsider. Rather they could be either or both, but it must be based on merit and only after that merit is assessed internally.
Based on merit and the requirements for the position, two assistant governors at the RBA are strong contenders – Michele Bullock and Christopher Kent. Luci Ellis is a strong candidate too.
KENT – FINANCIAL MARKETS AND ECONOMICS
If you think the biggest contribution Guy Debelle made as a deputy governor is through his expertise in financial markets, then Kent becomes a stronger candidate than Bullock.
He also brings in experience gained as assistant governor for economics from 2012 to 2016.
Kent has been the assistant governor for financial markets since 2016 when he replaced Debelle. Significantly, he has been in the position during the pandemic when the RBA introduced yield target policy, changed the width of the cash rate corridor, and implemented asset purchases. Each of those decisions impacted the RBA’s domestic market operations, and likely required quick decision-making on a daily basis.
While Debelle likely made the biggest contribution in all those decisions and kept close watch on the implementation of monetary policy and its impact on financial markets, the second-largest contribution probably came from Kent.
The yield target policy is over and asset purchases have ended but there is a lot of work ahead as the RBA starts shrinking its balance sheet. There would be no better person to lead this than the one who was closely involved with the expansion of the balance sheet.
It is the right time for Kent to step up.
It is also worth noting Debelle was the first deputy governor who was elevated to that position directly from financial markets. Until then, it was always the assistant governor for economics who got promoted.
Not only did Debelle deserve the promotion but in terms of timing it was perfect for the RBA. It was perfect for Governor Philip Lowe too to have his deputy with financial markets experience because his own experience is probably not that deep in this area.
BULLOCK – FINANCIAL STABILITY
If you consider experience in financial stability as very important for a deputy governor at this stage of interest rate cycle, Bullock becomes a slightly stronger candidate.
Bullock also fulfils merit-cum-seniority criteria if the RBA wants to be seen as an organization which rewards seniority.
Bullock has been the assistant governor for financial system since 2016, and is the senior-most of the four assistant governors, taking up her position two months before Kent and Ellis. She has also been at the RBA since 1985.
After a series of rate cuts that lasted for nearly a decade, the RBA’s interest rate cycle is set to turn when it will likely raise the cash rate later this year for the first time since 2010. This is expected to have implications for the housing market and depending on how far the cash rate goes, there could be implications for financial stability.
So, if financial stability’s influence on monetary policy is likely to increase going ahead, it would be useful to have Bullock in the deputy governor’s role.
ELLIS – ECONOMICS AND FINANCIAL STABILITY
Luci Ellis would also be a strong candidate based on her deep experience in economic analysis and as assistant governor for economics, and her previous roles in financial stability. Ellis spent eight years as head of financial stability department before she took over as assistant governor.
Like Bullock, Ellis doesn’t have financial markets experience, but she has a strong combination of economics and financial stability expertise.
--Contact: Sophia@centralbankintel.com