The Australian Federal Government is moving to overhaul the Reserve Bank of Australia following its first review since the 1980s and months of consultation with current and former RBA board members and staff, the Opposition and international experts and academics.
The new legislation will give the bank’s expert independent members more responsibility for setting rates as a monetary policy board, with a separate governance board to oversee day-to-day operations, splitting the central bank’s responsibilities.
These reforms would also result in fewer policy meetings (8 two-day meetings rather than 12 per year), a simpler two-pronged mandate of price stability and full employment, and a reinforcement of the banks’ independence with the removal of the treasurer’s power to overrule monetary policy decisions.
That power has never been used in Australia but will now cease to be an option going forward.
Reform, renew and refocus
“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,” Federal Treasurer Jim 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.”
Further changes include removing the RBA’s ability to direct lending activities of private banks and reductions in term limits for RBA members.
RBA members previously enjoyed 5-year terms with up to 10 years in the position, but the new legislation would allow that initial term to be extended by only two years.
It’s expected the RBA will be operating under its new policies by the middle of next year.