Initially planned for 1 July, the legislation to implement the findings of an independent review into the Reserve Bank of Australia (RBA) has faced delays in the Senate due to insufficient support from the Coalition and is not slated to commence early next year.
“It’s dragged on too long, frankly, and we want to get cracking,” Chalmers said on Friday, placing the responsibility on shadow treasurer Angus Taylor to rally his colleagues on this key issue.
Chalmers reiterated his commitment to a bipartisan approach, stressing that the reforms are essential for modernising and strengthening the RBA’s role in the economy.
A central element of the government’s legislation is splitting the RBA board into separate panels for interest rate-setting and governance, as per the recommendations from the independent review into the central bank last year.
“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. It’s such a crucial institution in our national economy and we want to make sure that it is as strong and as modern and as independent as it can be, and that’s what’s guided us when it comes to these Reserve Bank reforms,” Chalmers said.
“Now, we want these changes to endure after changes in governments, and that’s why we’ve taken a really bipartisan approach to the recommendations of the review and the legislation which is before the parliament right now.”
To address concerns from the Coalition, Chalmers this week offered to amend the legislation, allowing all six external members of the present board to transition to the new interest rate-setting board. This move is seen as a significant concession aimed at securing the opposition’s support.
“Under the arrangements that I’ve proposed to the opposition in the interests of getting a deal here, I have proposed that everyone who’s on the current Reserve Bank board would go on the monetary policy board unless they write to me and indicate a willingness to go on the governance board instead,” the Treasurer said.
“The Reserve Bank Governor has made clear her views – she would like to see some continuation and experience on both boards, but I’ve been prepared to make that proposal to the opposition in good faith.”
He confirmed he had written to each RBA board member this year to see whether they would prefer to serve on the interest rate-setting or governance board.
“I was obligated earlier in the year to write to the members of the existing board to ask them what their preferences were and then the Reserve Bank Governor had conversations with each of them to see where their thinking was at,” he said.
Additionally, Chalmers said on Friday he intends to retain the federal government’s power to override the RBA on interest rates but intends to put new limits on that power. This follows criticism of the original proposal in the review to repeal the government’s override power – a move opposed by former RBA governors and Coalition members.
Under the new proposal, the government would only be able to veto interest rate decisions if they can demonstrate that their reasoning meets a public interest test.
“We are prepared to limit the parliament’s override powers to emergency situations, to rare instances. That has come about in the discussions between myself and the opposition,” Chalmers said.
Responding to the Treasurer’s statement, Taylor expressed his disappointment at witnessing “these discussions unfold in the media”.
“The Coalition is committed to continuing these negotiations in good faith and in confidence,” the shadow treasurer said.
Taylor added that the transition of the existing RBA board to the new Monetary Policy Committee has been “consistently raised with the Treasurer and his office since the first meeting in September 2023”.
“We remain resolute in our belief a sack and stack strategy is not appropriate,” he said.
“Our Reserve Bank hasn’t always got it right. But continuity, stability, and independence of interest rate setting is critical during these inflationary and uncertain economic times.”
Commenting on the apparent concessions made by the Treasurer, Taylor suggested that Chalmers had recognised “his previous positions were untenable” and added: “Despite long delays, it is promising to see movement, but we will take the time to ensure issues are resolved with due diligence”.
Chalmers, however, hinted that he had accommodated Taylor’s suggestion in order to achieve a set of changes that both major parties in parliament could support.
