Greens lash out over massive overhaul of the RBA

Australia’s central bank is set for a major shake-up after a wide-ranging review but not everyone is on board with the recommendations.

A plan to strip the Reserve Bank board of the power to set interest rates in favour of monetary policy experts has received the broad support of the Coalition.

The biggest shake up to the central bank in decades will be outlined by Treasurer Jim Chalmers on Thursday, including in principle support for all 51 recommendations of an independent RBA review.

While the Coalition treasury spokesman, Angus Taylor, indicated he was “very open” to the reform, the Greens leader Adam Bandt remained unconvinced.

Speaking with ABC’s RN, Mr Bandt accused the government and opposition of washing their hands of the problem.

“We’ll have a look at all of the recommendations of the review … but the major party stitch up isn’t going to fix the inflation problem,” he said.

“We need more than just outsourcing the issue of tackling inflation to the RBA … the problem with leaving inflation issue only to the RBA, then you give them only one tool, then if your only tool looks like a hammer, then every problem looks like a nail.

RBA Governor Philip Lowe has come under scrutiny for monetary policy decisions. Picture: NCA NewsWire / Gary Ramage

“They’re going to keep on raising interest rates, inflicting pain on everyday people.”

The review, to be made public on Thursday morning, was commissioned in July last year, in a bid to strengthen the central bank amid an increasingly complex global economic landscape.

Over the past year, the central bank and Governor Philip Lowe came under intense scrutiny for how monetary policy decisions – particularly rate rises – have been communicated.

Dr Lowe told Australians as late as November 2021 that the bank was likely to hold the cash rate steady at 0.1 per cent until 2024.

Since May 2022, the cash rate has risen to 3.6 per cent.

The review will recommend establishing two separate boards: one concerned with monetary policy to set interest rates, and a separate governance board to handle the rest of the RBA’s remit.

Treasurer Jim Chalmers is expected to announce the government’s in-principle agreement to the report’s 51 recommendations. Picture: NCA NewsWire / Martin Ollman

A move to create a second board will likely require legislative change, with the government looking to the Coalition for bipartisan support.

Mr Taylor said bringing the RBA in line with it’s international peers, such as the Bank of Canada and the Bank of England, was “well worth consideration”.

“The direction of the review, we think, is very positive and it is absolutely crucial to keep a central bank very focused on its task,” he told ABC’s RN.

“Our plan from the start and our goal from the start was to be as bipartisan as possible on such an important institution to Australia’s economy.”

Dr Chalmers, who has engaged Mr Taylor during the review process, said he looked forward to working across the parliament and with the RBA to implement the dozens of recommendations.

“The review is all about ensuring Australia’s central bank and monetary policy arrangements are as strong and effective as they can be into the future,” he said