ABSTRACT
This chapter explores the issues and questions by examining the changing institutional role of Australia's central bank, as well as major shifts in monetary policy. It focuses mainly on changes since the 1970s, a period in which there were two sets of challenges and two related sets of responses. The first challenge was that of the inflationary crisis of the 1970s and 1980s. The second was that posed by global and domestic financial deregulation. The responses were, first, a redefinition of monetary policy, and second, an institutional reshaping of the role of the Reserve Bank of Australia (RBA). The increasing centrality of monetary policy, together with the relative independence of central banks from government suggests that, in a liberal democracy, special attention must be paid to the legitimacy and democratic accountability of central banks. The chapter examines the monetary policy transformation and the institutional reshaping of the RBA.
