Economist who argued RBA must better explain interest rate decisions to join board

Respected independent economist Bruce Preston, who once argued the Reserve Bank had to improve how it explained its interest rate decisions, will go on to the board that sets monetary policy.

Treasurer Jim Chalmers said Preston, a professor of economics at NSW University, would take a position on the Reserve Bank’s interest rate setting committee from March 1.

He will replace businesswoman Alison Watkins, who has been on the Reserve Bank board since 2020.

Chalmers said the appointment of Preston, who worked as an economist at the RBA in the mid-1990s and has worked as a consultant to the federal Treasury, had followed an independent selection process and consultation with the Coalition.

“Professor Preston is one of Australia’s most highly respected and experienced macroeconomists and he will do an excellent job on the monetary policy board,” he said.

“The RBA is a vital economic institution and we are making sure it has the right mix of skills and expertise to meet Australia’s economic challenges.”

A panel made up of current governor Michele Bullock, former Treasury head Martin Parkinson and current Treasury secretary Jenny Wilkinson compiled a shortlist of potential candidates for the board.

Preston, who has worked at Monash and Melbourne universities, brings to eight the number of trained economists on the nine-member committee that now sets interest rates.

The bank pushed the cash rate up at its last meeting in February to 3.85 per cent. Financial markets don’t expect a follow-up increase until June.

Preston has written extensively about monetary policy, economic theory and central banks in a career spanning 30 years.

In 2020, he produced a paper arguing “basic reforms” to the Reserve’s communication system were needed to improve the accountability and effectiveness of monetary policy. This pre-dated the review of the RBA that led to the overhaul of its communication strategy, which now includes press conferences by bank governor Michele Bullock.

The changes to how the bank communicates to the public also include public appearances by board members, which are due to start later this year.

The appointment of Preston is one of two substantial changes that Chalmers will oversee to the Reserve Bank this year. The term of economist Ian Harper, who has served on the bank since 2016, is due to finish in August.

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