The federal government is one step closer to implementing significant reforms to the Reserve Bank that would create two boards responsible for separately managing interest rate decisions and governance.
Treasurer Jim Chalmers called for bipartisan support from shadow treasurer Angus Taylor after he agreed to Mr Taylor’s “good faith” concerns that would prevent the government from stacking the board with Labor-aligned members.
Under the proposal, members currently on the RBA board would shift to the monetary policy board, unless they directly write to Dr Chalmers to request a move to the governance board.
Dr Chalmers also said that instead of scrapping the government’ section 11 powers to override RBA decisions, a recommendation made following a 2023 review, they would instead only be downgraded.
He said he was “prepared to limit the parliament’s override powers to emergency situations to rare instances”.
Speaking about the proposed changes as a whole, Dr Chalmers said they would make the powerful body more transparent and independent.
“It’s about making sure that it has the structures, the decision-making abilities, the people and the culture that we need for the Reserve Bank to continue to make its really important decisions in our economy,” he said.
“It’s such a crucial institution in our national economy, we want to make sure that it is as strong and as modern, as independent as it can be, and that’s what’s guided us when it comes to these Reserve Bank reforms.”
Dr Chalmers said he wanted to ideally pass the legislation to approve the changes in the final six sitting weeks of the year, so they can be in place by early next year.
He also praised Reserve Bank governor Michele Bullock for “embracing” the changes, such as holding a press conference following board meetings when the cash rate has changed.
“I wanted to really pay tribute to the Reserve Bank governor who’s embraced these reforms, and some of them don’t require legislation,” he said.
“They’re already, I think, improving the way that the Reserve Bank interacts with the public, but these other changes will further strengthen, modernise the Reserve Bank and make it more independent.”
The Greens, who have been critical of the reforms, and have instead called on the government to use its section 11 powers to intervene and lower interest rates.
Party leader Adam Bandt lashed Dr Chalmers for watering down the powers.
“The Treasurer could have worked with us to protect stressed homeowners, but instead Labor prefers to cut yet another dirty deal with the Liberals,” he said.
“Jim Chalmers could be using his section 11 powers to bring some relief to homeowners and renters, but instead he’s trying to water his powers down.
“We’re concerned these reforms will weaken the Treasurer’s powers to stop soaring interest rates, which would be bad news for renters and mortgage holders.”