Against increased central bank independence in Australia: better balancing the unelected authority to decide big distributional trade-offs with principles of constitutional democracy

Prompted by the failed attempt to increase Australia’s central bank independence through removal of the government’s override, this article examines the central bank’s unelected authority to determine monetary policy and assesses whether this is justifiable in a democracy. It shows how political—and thus the people’s—power over economic management has diminished, positioning central bank independence within an antipopulist and antidemocratic movement in constitutionalism that has quasi-constitutionalized neoliberal approaches. In setting interest rates, central banks make decisions that involve big distributional trade-offs: sacrificing employment to achieve price stability; redistributing wealth from labor to capital. This article argues that such trade-offs necessitate retention of ultimate democratic control. The article thus supports retaining and refining Australia’s qualified central bank independence, and suggests novel policy options—compulsory savings and a job guarantee—to reduce the trade-offs employed to control inflation, making delegation to an unelected entity more justifiable and compatible with constitutional democracy.