By Shane Wright
One of the country’s most distinguished economists and two high-profile business leaders will form part of the biggest reforms to the Reserve Bank since its inception, but borrowers hopeful for mortgage relief will still have to wait months for any cut in official interest rates.
Treasurer Jim Chalmers on Monday announced the culmination of the most sweeping changes to the RBA’s operation since its inception in 1960, including a separate board to oversee its overall governance and another board to guide monetary policy.
Reserve Bank of Australia governor Michele Bullock.Credit: Oscar Colman
Defying Coalition claims he would “sack and stack” the boards with Labor-aligned appointees after doing a deal with the Greens to get the underpinning laws through parliament, Chalmers avoided radical appointees and picked blue-chip corporate and economics figures, including a one-time head of the big business lobby.
Finalising a reform process that has included post-meeting press conferences, two-day meetings to set interest rates and more open communication with the public, Chalmers said the new RBA structure would strengthen the institution and help its decision-making process.
The interest rate committee will comprise existing RBA board members Ian Harper, Alison Watkins, Iain Ross and Carolyn Hewson plus governor Michele Bullock, her deputy, Andrew Hauser, and Treasury secretary Steven Kennedy.
They will be joined by Marnie Baker, who has 35 years’ experience in the financial sector, including as chief executive of the Bendigo and Adelaide Bank and deputy chair of the Australian Banking Association.
Also on this committee will be economist Renee Fry-McKibbin, who was on the RBA review panel that recommended the creation of separate monetary policy and governance boards. Fry-McKibbin is a professor at the Australian National University and is one of the nation’s most respected monetary policy experts.
Within the economics community, Fry-McKibbin was recognised as a high-quality appointment, while Baker’s long-standing links to regional banking were seen as an important insight into economic developments outside the nation’s capital cities.
Fry-McKibbin’s appointment marks the first time a husband and wife have held positions at the bank. Her husband, Warwick, served on the RBA board for a decade between 2001 and 2011.
Two members of the current board, Elana Rubin (who was appointed by Chalmers) and Carol Schwartz (appointed by then-treasurer Scott Morrison) have asked to move to the governance board. Schwartz will become the governance board’s deputy chair.
They will join Thodey, who across a long business career has run Telstra and IBM Australia, and Westacott, who was the head of the Business Council of Australia.
Also on the governance board will be lawyer Danny Gilbert, co-founder of Gilbert+Tobin, and Swati Dave, who was managing director of Export Finance Australia between 2017 and 2022 after a long finance career.
Treasurer Jim Chalmers says the reforms to the RBA will improve its decision making process.Credit: Alex Ellinghausen
“This is about modernising the Reserve Bank, picking up international best practice, and making sure that we equip the Reserve Bank to make the best, most considered decisions into the future,” Chalmers said. “That’s what the whole Reserve Bank review has been about,”
Bullock will continue as governor of the RBA and Hauser as her deputy. The new board members were selected via a panel that had included Bullock, Kennedy and Martin Parkinson, a former head of the Department of Prime Minister and Cabinet.
The boards begin on March 1. Financial markets put the chance of an interest rate cut at the bank’s February meeting at 60 per cent. A cut is not fully expected until the RBA’s March 31-April 1 meeting.
Watkins’ term is due to end in mid-December. This will be extended to February 28 next year.
In a statement, Bullock welcomed the appointments to both boards.
“I am looking forward to working with Marnie Baker and Renee Fry-McKibbin,” she said. “Their expertise and
insights will be vital as we continue our efforts to bring inflation back to target.
“The new members appointed to the governance board, Swati Dave, Danny Gilbert, David Thodey and Jennifer Westacott, will greatly assist the RBA in supporting and overseeing management as we continue to transform the organisation.”
Before the decision, the Coalition had maintained that Chalmers would “sack and stack” the board. It had argued that all members of the existing board should be shifted to the monetary policy committee. That was at odds with the RBA review, which argued the two new committees needed people with specialist and different skills.
Shadow treasurer Angus Taylor said the changes destabilised the board and undermined its independence.
But pressed on which of the appointments undermined the bank’s independence or its stability, Taylor would only say he was attacking Chalmers’ process rather than any individual.
“It’s not about the individuals, it’s about the institution,” he said.
“This is about destabilising a board when we need a stable board. An independent Reserve Bank, a credible, capable Reserve Bank organisation.
“Through our history with monetary policy … stability, independence, credibility and capability of the organisation is absolutely essential, and this government has taken a different view of it.”
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