Chalmers eyes Greens lifeline for Reserve Bank overhaul

Treasurer Jim Chalmers may drive through the biggest overhaul of the Reserve Bank in a generation with support from the Greens after the Coalition walked away from months of negotiations and concessions aimed at winning bipartisan approval for the changes.

Amid claims from shadow treasurer Angus Taylor that the time for talks over the changes had run out, the Greens signalled they might support the creation of a separate interest rate committee within the bank if the government retained the right to overrule the RBA in areas such as rate decisions.

Treasurer Jim Chalmers says he is prepared to talk to the Greens over his reforms of the Reserve Bank.Credit: Alex Ellinghausen

Last year’s independent review of the RBA found the bank had struggled with its long-standing structure under which the board, made up of senior executives and people appointed by the government of the day, oversees the institution’s operation, the money supply and interest rate settings.

The review recommended the creation of an interest rate committee that would include people with economic and finance expertise, plus a separate governance board with management expertise.

The Coalition initially supported the move, but in recent months has raised fears Chalmers would “sack and stack” the new committee. It had demanded all members of the current board be moved to the new committee.

Chalmers had agreed to this, but also said he would not move a board member if they preferred to shift to the governance board.

Taylor accused Chalmers – who last week said high interest rates had smashed the economy – of undermining the RBA while trying to deflect attention from the government’s role in the country’s inflation.

He said the Coalition would not support any changes to the bank structure, even if they were in line with what it wanted.

“There’s been no lack of clarity about what we expected from the start, and sadly, the government having brought forward legislation that doesn’t get to where we need it to, and having spent the last week or so out there bagging the Reserve Bank, I think it’s time to move on,” he said.

“There’s a point at which you say, enough, let the Reserve Bank get on and do its job.

“And to the government, can it focus on doing its job? Stop the blame shifting, stop the excuses, stop the witch hunts against everybody, except for the one thing that really counts, which is fighting inflation.”

Taylor would not be drawn on whether the Coalition would go to the next election promising to implement the review’s recommendations.

Chalmers said while he would have preferred a bipartisan deal with the Coalition, he was prepared to talk to the Greens, after previously avoiding direct negotiations with the minor party.

“We’ve not been seriously negotiating with the Greens on it, and that’s because I’ve expressed a view and a preference that this be a bipartisan outcome with the major governing parties,” he said.

Greens senator Nick McKim says his party is prepared to negotiate over the RBA.Credit: Alex Ellinghausen

“I think that’s in the country’s interests. I think it’s in the national economic interest that there be bipartisanship between the major parties.

“Unfortunately, the position that the Coalition has taken deals the minor parties into the conversation more than they should be in my view. And that’s an unfortunate development.”

But a deal with the Greens may be achievable.

Greens economic justice spokesman Nick McKim said his party would be “very happy” to start good-faith negotiations over the proposed changes.

He signalled the Greens had two key demands in any negotiation, adding the party would also like to see the RBA have an objective of protecting the nation’s environmental processes.

“We are open to a discussion with Dr Chalmers around the structure of the board of the RBA or boards of the RBA, but we are very motivated to make sure that section 11 and section 36 are maintained,” he said.

The RBA review recommended the abolition of section 11 of the Reserve Bank Act. This long-standing power, which enables the treasurer of the day to overrule a bank decision, was put in place to avoid a repeat of a Great Depression-era stand-off between the then Commonwealth Bank and the Scullin government.

The power has never been used, partly because it requires the bank to make public its reasons for not agreeing with the treasurer.

The review also recommended axing section 36 of the Banking Act, which enables the Reserve Bank to in effect direct where private banks funnel their credit.

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