Reserve Bank of Australia set to undergo a major shake up
Reserve Bank of Australia board is stripped of power in biggest shakeup in a generation after catastrophic string of blunders and 10 consecutive rate hikes
The Reserve Bank will be split into two boards, one of which will focus solely on interest rates, in a major shakeup idea that is expected to be adopted by the government.
On Thursday, Treasurer Jim Chalmers will release the RBA assessment report – “An RBA Fit for the Future” – and is expected to announce the government’s agreement in principle with all 51 recommendations.
The review was commissioned last July in an effort to strengthen the central bank amid an increasingly complex global economic landscape.
Over the past year, the central bank and Governor Philip Lowe have come under intense scrutiny for the way monetary policy decisions – particularly interest rate hikes – have been communicated.
Dr. As late as November 2021, Lowe told Australians that the bank would likely keep cash rates stable at 0.1 percent through 2024.
Since May 2022, the cash rate has risen to 3.6 percent.
NATIONAL PRESS CLUB PHILIP LOWE
The review will recommend the establishment of two separate councils: one dealing with monetary policy and a separate governing council.
The evaluation is expected to show that the decision-making and management agreements will be effective as a result.
The monetary policy council will focus primarily on controlling interest rates, especially as the RBA tries to bring inflation back to the target of two to three percent.
The other board will focus on the rest of the RBA’s “governance” job, including banknote printing.
JIM CHALMERS
Some recommendations require legislative change, while others are tasked with implementing them by the RBA since it conducts monetary policy independently.
Dr. Chalmers said he looks forward to working across parliament and with the RBA to implement the dozens of recommendations.
“The review is about making sure Australia’s central bank and monetary policy is as strong and effective as possible going forward,” he said.
Dr. Chalmers enlisted shadow treasurer Angus Taylor during the review process.
Mr Taylor said it was “critical” that the review’s recommendations were acceptable to both major parties.
“This provides certainty about the outcome of this review. With inflation at its highest level in decades, this is in the best interest of Australians,” said Taylor.
The Coalition’s input into this review has been aimed at ensuring that the Reserve Bank’s monetary policy approach remains laser-focused on bringing inflation back to the 2-3 percent target, properly acknowledging the interaction of monetary and fiscal policy and recognizes any governance reforms to be balanced, appropriately staged, preserve the Reserve Bank’s independence, and strengthen the Reserve Bank’s capabilities.
“The Reserve Bank of Australia has served Australia well for a long time. We want to ensure that this critical economic institution is maintained and that there are no distractions to get in the way of core objectives.”
More than 1500 contributions were received during the review process.