SYDNEY (Reuters) – The Australian government will introduce legislation this week that would give the central bank’s independent expert members more responsibility for setting interest rates with a new specialist monetary policy board.
The bill would implement the recommendations of a review of the Reserve Bank of Australia (RBA) released in April that requires legislation enacted by parliament, Treasurer Jim Chalmers said on Sunday.
The review outlined a range of reforms including a separate RBA board for day-to-day operations, fewer policy meetings and a simpler dual mandate of price stability and full employment, bringing it more in line with other major central banks.
“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,” Chalmers said in a statement.
The Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023 will reinforce the RBA’s independence from government, including by repealing the power of the treasurer to overrule monetary policy decisions, he said. It follows months of government consultation with the opposition parties.
Chalmers had indicated in-principle agreement to all 51 of the recommendations made by the review, which he set up in July 2022. Chief among them was to split the RBA’s board into one for monetary policy and one for governance.
The review recommended the new Monetary Policy Board (MPB) consist of six external members with expertise in macroeconomics, the financial system, labour markets and the supply side of the economy.
The details of the new MPB will be finalised next month, Chalmers said.
The six external members on the current board are mostly business executives. The RBA governor, deputy governor and the treasury secretary are the other three members.
The review recommended the government legislate changes to take effect on July 1, 2024.
(Reporting by Renju Jose in Sydney; editing by William Mallard)