5 Interview Questions for the RBA’s Next Deputy Governor


Reserve Bank Deputy Governor Guy Debelle left the building. Wednesday was his last day. Six days after his shock resignation, he left to become chief financial officer of the green energy company Fortescue Future Industries.

Which leaves treasurer Josh Frydenberg scrambling to find a replacement.

Do you have what it takes to be Australia’s second central banker?

Whoever Treasurer Frydenberg chooses will be in a prime position to step into the number one position when Governor Philip Lowe’s term ends in September 2023.

Traditionally, the keys to the safe in a basement at Martin Place in Sydney have been held by insiders – a long, laborious apprenticeship on the upper floors of the Martin Place head office was the main prerequisite.

But if the process were more open, what would a formal job interview entail?

So you can try out your financial courage at home, here’s what a formal interview might look like, with suggested answers so you can test yourself.

1. Under what circumstances would you increase the cash rate by 0.50 percentage points?

To increase by 0.50 percentage points for the first time in decades would be “brave”. 0.50 is double the usual 0.25, but it may be necessary. Surely this could have been justified when inflation got out of control during the mining boom preceding the global financial crisis.

So when would be the right time? When inflation reached 4%? AT 5% ?

Although there is no one right answer, the answer you give is an opportunity to demonstrate your inflation-fighting credentials.

2. What do you think was the biggest monetary policy mistake in the era of inflation targeting?

Developing real-time policy is always fraught with pitfalls and mistakes are inevitable. But only by acknowledging our mistakes can we do less.

Although the Reserve Bank has an enviable track record compared to most other central banks, it is not perfect.

While the understatement of inflation from 2016 to 2021 was perhaps the biggest policy mistake, the high inflation that occurred before the global financial crisis was another.

3. If you had to choose between lowering the inflation target range to 1-2% or raising it to 3-4%, which would you choose?

The answer should be obvious. One of the biggest lessons of the last decade of macroeconomics has been that inflation targets have been set too low in most OECD economies, so low that interest rates have had to be set near from zero to drive down real interest rates (rate minus inflation). .

While there are good reasons to be cautious before changing the inflation target, if you have to choose between raising it or lowering it, there is only one right answer.

4. If you were trapped on a desert island and could only choose one set of data to guide your decisions, what would it be?

It would be difficult to ignore inflation, given its importance in the RBA charter (although a correct answer would choose the cut-medium on the overall rate).

If asked for a second set of data, the answer should focus on the second part of the term and be a measure of real activity such as the unemployment rate, although this is not very useful without a clear idea of what the floor under unemployment should be. Alternatively, a more crisis-minded candidate might choose a fast-moving financial variable (such as bank debt spreads) so that they can react quickly to sudden shocks..

5. Suppose a board member starts to run away and oppose the consensus position. What would you do?

An unlikely scenario, but certainly possible. It would be a nightmare of a scenario with no clear answers – especially if you didn’t know which board member is leaking.

Maybe you could go to the treasurer and ask for a whole new list of board members, even with the terrible look it would send the country.

Or maybe there is a case of radical transparency where board members can voice their feelings (if not the bank’s confidential data). It’s not such a bad answer.

The treasurer is expected to announce the successful candidate before the government goes into caretaker mode in April.

Read more: Game of Loans: The Reserve Bank of Australia loses its heir apparent


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