The Coalition will block Treasurer Jim Chalmers’ attempt to create a new specialist interest rate-setting board at the Reserve Bank over concerns the government could stack the committee with Labor-aligned figures after he accused the central bank of “smashing the economy”.

The decision means Dr Chalmers’ efforts to complete an overhaul of the central bank are all-but-dead unless the government accedes to shadow treasurer Angus Taylor’s demand that all existing RBA board members retain their role setting interest rates, without exception.