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Major changes to the way the Reserve Bank operates and manages the economy will hinge on the federal government winning support from the Coalition, with Treasurer Jim Chalmers declaring he does not want the Senate pulling apart any reforms to the institution.
Chalmers, due to soon release the first independent review of the Reserve since the early 1980s, revealed on Monday that legislative changes to the RBA Act would be needed to overhaul the bank’s operation.
Treasurer Jim Chalmers says he does not want to run the gauntlet of the Senate without bipartisan support for changes to the Reserve Bank.Credit: Alex Ellinghausen
The review, which made 51 recommendations in an almost 300-page report, has examined all parts of the Reserve Bank, its internal makeup, its operating charter and how it communicates with the public.
Chalmers said shadow treasurer Angus Taylor and cross-bench members of the parliament would soon be briefed on the review’s findings.
He said he was hopeful there would be bipartisan support for changes that would improve the bank’s operation.
“In the absence of bipartisanship, we don’t really want to run the gauntlet in the Senate, for example, on legislative change to the RBA Act,” he said.
Changes to the Reserve Bank Act of 1959 will be required due to changes proposed by the institution’s review.Credit: Peter Rae
“The RBA Act should be something that we can agree on and put beyond politics. That’s my objective. My aspiration.”
Without bipartisan support in the Senate, any legislative change to the RBA would require Labor winning over the Greens – who have called for the sacking of current governor Philip Lowe – and minor parties.
The review was prompted by a Sydney Morning Herald and Age investigation that showed concerns about how the bank was operating monetary policy before the COVID-19 pandemic.
Anger over the bank has intensified since then after the RBA – which had signalled it would hold official interest rates at 0.1 per cent until 2024 – started tightening monetary policy in May last year.
Among the issues canvassed by the review is the removal of the power of the RBA board to set interest rates with this transferred to a committee of monetary policy specialists. A change of this nature would require a change to the Reserve’s operating act that was drafted in 1959.
The current act does not cover the statement of the conduct of monetary policy, which is signed between the treasurer and the governor. This statement includes the RBA’s 2-3 per cent inflation target.
The last statement was signed between Lowe and then-treasurer Scott Morrison in 2016. Chalmers has been waiting on the RBA review before deciding on the next monetary policy agreement with the bank, which could be with a new governor.
Chalmers said apart from legislative changes, the review has also proposed reforms that would overhaul how the RBA governor and the bank board operate.
But Chalmer said he believed the current arrangement around the monetary policy agreement between the treasurer and the governor, which is not legislated, worked well.
“I think that it makes good sense to have a statement which can be more frequently updated. And to have it built on a foundation of certainty,” he said.
“I think that the key for the recommendations in this review will be to get the balance right between the legislative framework and the statement on conduct.”
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