By Shane Wright
Treasurer Jim Chalmers will have to appoint almost an entirely new board to run the Reserve Bank and oversee its operation, including protecting the nation’s payment system from cyberattacks, under the deal he hopes to strike with the Coalition to reform the institution.
As shadow treasurer Angus Taylor signalled a possible resolution to the stand-off between the major parties over the biggest reforms to the Reserve Bank in four decades, Chalmers said he wanted to “get cracking” on changes that he hoped to have in place by the start of next year.
Treasurer Jim Chalmers says he is looking for bipartisanship on changes to the Reserve Bank board.Credit: Nine
An independent review of the bank commissioned by Chalmers soon after the government was elected recommended a major overhaul of both the way the RBA is managed and sets official interest rates.
Unlike almost every other major central bank, the RBA board – appointed by the treasurer of the day – sets monetary policy and oversees the institution’s operation.
The review recommended a separate interest rate setting committee, dominated by people who would have expertise in areas such as “open-economy macroeconomics, the financial system, labour markets, and the supply side of the economy” while also being able to make decisions “under uncertainty”.
A separate governance board would oversee the bank’s organisation strategy, performance, finances, large projects, resourcing, staff pay, succession planning, risks including cyber risks, and the delivery of the nation’s banking and cash services.
The bank employs more than 1400 people, of whom only a quarter work in core policy areas such as interest rate setting and the payments system. A third work in IT with a heavy focus on technology and cyber risk.
The Coalition had raised fears that Chalmers would “stack” the monetary policy committee with people who lacked the experience or ability to aggressively target inflation, arguing that all members of the current board should go on the new committee.
Chalmers has now agreed to that position, saying he will shift all members over to the committee unless they write to him asking to go on to the governance board.
But it potentially leaves the governance board with just three members, including governor Michele Bullock, her deputy Andrew Hauser, and Treasury secretary Steven Kennedy. Chalmers as treasurer would have to appoint six more new governance board members.
Taylor would not say if the Coalition would accept Chalmers’ new offer, but said the changes recognised the government’s original position was untenable.
“Our Reserve Bank hasn’t always got it right. But continuity, stability and independence of interest rate setting is critical during these inflationary and uncertain economic times,” he said.
“Despite long delays, it is promising to see movement, but we will take the time to ensure issues are resolved with due diligence.”
Taylor said the reforms would allow people to serve on both the governance board and monetary policy committee. However, that would be at odds with the RBA review, which argued they required people with different skills.
Shadow treasurer Angus Taylor has signalled a possible resolution to the standoff on reform of the Reserve Bank.Credit: Rhett Wyman
Bullock noted last week that she wanted some continuation between the monetary policy committee and governance board, saying it would be helpful if “there was at least one or two of the current board members who are familiar with the bank … to move across to the governance board rather than having a whole new governance board”.
Chalmers said he was prepared to make concessions so both sides of politics could improve the RBA’s operation.
“This is about strengthening and modernising the Reserve Bank in the most bipartisan way. Wherever the opposition has come to me with a proposal in good faith, I have tried to accommodate that,” he said.
“I think it is time to end this dragging for too long so we can get cracking from the start of next year.”
But the Greens, who have argued for the treasurer to overrule the bank on its interest rate settings, said the government’s approach would just force higher rates on the nation’s home buyers.
“Another day, another deal between Labor and the Liberals. It’s no wonder people are telling us it’s getting harder and harder to tell Labor and the Liberals apart,” Greens leader Adam Bandt said.
“The treasurer could have worked with us to protect stressed home owners, but instead Labor prefers to cut yet another dirty deal with the Liberals.”
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