Treasurer Jim Chalmers has announced that legislation to reform, strengthen, and modernise the Reserve Bank of Australia (RBA) will be introduced to Parliament this week.
In a statement on Monday, the Treasurer said the move follows months of consultation, including with the RBA, the opposition, and stakeholders, since the RBA review was released with 51 recommendations in April this year.
“The Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023 will reinforce the RBA’s independence, clarify its role and modernise its structure,” said Dr Chalmers.
“We want to ensure Australia’s central bank remains world class with a monetary policy framework fit to meet our current and future economic challenges.”
The bill will implement recommendations of the RBA review which require legislation, including splitting the RBA board into two separate boards.
The monetary policy board will be responsible for monetary policy decisions and oversight of the RBA’s contribution to financial system stability. It will be chaired by the governor, working alongside the deputy governor, treasury secretary, and six external members.
Meanwhile, the separate governance board will have oversight of organisational strategy, financial reporting, large IT and other projects, resourcing, strategic staff planning, risk management including cyber risk, and delivery of banking and banknote services.
While the RBA review recommended that the governance board have an external chair, Dr Chalmers previously indicated that the governor will chair the new board for at least five years “until we review it and make sure it’s working as we intended”.
Other RBA review recommendations that require legislation and will be implemented by the government’s bill include:
- Mandating that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future”.
- Confirming that monetary policy should have dual objectives of price stability and contributing to full employment.
- Reinforcing the RBA’s independence, including by repealing the power of the Treasurer to overrule its monetary policy decisions.
- Clarifying the RBA’s responsibility to contribute to financial system stability.
Additionally, the Treasurer confirmed that the legislation will also establish robust governance arrangements for the RBA.
“The RBA review’s remaining recommendations are being implemented administratively by the government and the Reserve Bank, including through a new statement on the conduct of monetary policy that we aim to finalise next month,” Dr Chalmers said.
“These changes are part of the Albanese government’s broader efforts to reform, renew, and refocus the nation’s key economic institutions so that they can help meet current and future challenges.”
The RBA previously announced that it will begin implementing recommendations of the independent review that do not require legislation from its first meeting in 2024, including a move to eight board meetings a year instead of the current 11.
In a recent speech, Ms Bullock clarified that she is “100 per cent behind” the major changes underway to implement the recommendations made by the RBA review.
“The RBA is a great institution with a long history of serving the Australian people. But as times change, we must change,” she said.
As part of the speech, Ms Bullock laid out her vision for a more diverse, open, and inclusive RBA with a strengthened monetary policy decision-making process, which, she said, will prepare it for the future.
