In its 2017 Annual Report, the Board of Directors of the Reserve Bank refers to itself as “a unique governance body in the public sector”.

But unique is not necessarily synonymous with good.

Nearly three decades ago, Parliament amended the Reserve Bank Act. It enacted two significant changes to the Bank’s governance. It vested most of the Bank's powers in the Governor. It also reconstituted the Board as a watchdog to guard the public interest and protect the Bank’s independence.

As the Productivity Commission noted in its 2014 report, Regulatory institutions and practices, the Bank’s monetary policy function informed these changes. But the Bank’s current prudential regulatory roles now demand much more attention than they did in 1989. And yet, its governance arrangements have not changed since then.

The Productivity Commission says this reflects a tendency for legislators to graft powers onto existing regulators without giving due consideration to whether this necessitates a change in internal governance.

During its review, the Productivity Commission encountered public concern that the Bank’s single decision-maker model “concentrates too much power in one person and creates a risk of poor-quality decision-making”. This concentration of power is particularly troubling given that the only way the Board can effectively hold the Governor to account is to recommend their dismissal to the Minister of Finance.

Dismissal may be appropriate if the Governor misses monetary policy targets. But such a blunt accountability tool may not be suitable for the Bank’s wide-ranging systemic regulatory functions.

Many of those interviewed by the Productivity Commission preferred a model that is commonly applied overseas, where a small full-time executive board has decision-making power. A board of this nature allows a regulator to derive “the benefits of diversity of skill and experience" while reducing "the risk of dominance by one person”.

There is much to admire about the Reserve Bank. It has administered effective inflation targeting for 30 years and remained operationally independent.

But the mandate of the Reserve Bank has expanded in the last 30 years. It is high time to reconsider the Bank’s governance structure to account for that.

Unique is one thing, but appropriate is entirely another.