Treasurer Jim Chalmers has indicated that he expects to receive recommendations from the ‘wide-ranging’ review into the Reserve Bank of Australia (RBA) late next month.
Speaking to ABC’s Insiders on Sunday, Dr Chalmers said that he is planning to issue a response to the review’s final report in the lead up to the next federal budget in May.
“I’ve asked for that report to be provided to me on the 31st of March and I commit to responding and releasing it between then and the budget,” he said.
Among the issues being examined as part of the RBA review, which was announced in July last year, are the central bank’s objectives, policies, governance and culture.
The review is also expected to play a role in determining the future of RBA Governor Philip Lowe, whose current term is set to expire in September this year. As to whether Dr Lowe’s term will be extended, Dr Chalmers has previously indicated that all options are on the table.
When asked whether the RBA Governor’s future will be known by budget time, the Treasurer clarified that he is planning to provide his “initial response” to the review before then.
“I don’t know the magnitude of all the recommendations, but I’ll provide a view on it and I’ll release it before the budget,” he said.
“When it comes to governor Lowe’s appointment, we will consider that closer to the middle of the year but obviously the recommendations of the review will be part of that.”
According to Dr Chalmers, the RBA review represents an opportunity to think about the best structures, processes and objectives of the central bank going forward.
“It isn’t about one person or about one decision or even one set of decisions, it’s about how we take the bank forward into the future,” he stated.
“The decision about the Reserve Bank governor will be similar and it will be taken closer to the middle of the year in consultation with the Prime Minister and our Cabinet colleagues.”
Dr Lowe has faced criticism for suggesting that interest rates would likely not rise until at least 2024. The RBA has since hiked the cash rate nine consecutive times to 3.35 per cent, and the RBA Governor last year offered an apology to those who acted on his forward guidance.
Dr Lowe’s behaviour in the spotlight
Speaking to the ABC, the Treasurer was also asked about Dr Lowe’s presence at a private event last week organised by Barrenjoey and attended by traders from major banks, as reported by The Australian Financial Review, which coincided with a movement in bond prices.
“The governor operates independently from the government. I don’t clear his commitments that he makes in his diary,” the Treasurer said.
“I suspect that governors before governor Lowe have met with different players in the market. If people have got particular concerns, they’ve got an opportunity to raise them directly with governor Lowe and he can explain.”
When pressed as to whether he would be asking questions of the RBA about this issue, Dr Chalmers pointed out that the Governor would be appearing before two parliamentary committees within the next week.
“No doubt people will want to ask him about that and he can explain it,” he said.
“I think there’s a broader issue here about how the bank communicates the context for its decisions. This is one of the things that I’ve been discussing with the RBA review panel.
“I actually discussed it with them on Friday in one of the regular meetings that I had with the review panel ‑ how they communicate their decisions and the context behind their decisions is one of the key focuses of that.”
As to the performance of Dr Lowe to date, the Treasurer stated that he wasn’t going to “second guess” the RBA Governor.
“He’s got a hard job to do. He’s got to balance getting on top of this inflation challenge without crunching the economy,” Dr Chalmers said.
