RBA reform bill faces fight in the parliament, as Coalition prepares to move amendment

Jim Chalmers’ hopes that legislative reforms to the Reserve Bank would pass through parliament with bipartisan support are in tatters after the Coalition said it would move an opposing amendment.

Jim Chalmers faces a battle with the Coalition to get his Reserve Bank reform bill through the parliament. Picture: NCA NewsWire / Martin Ollman

Jim Chalmers’ hopes that his legislative reforms to the Reserve Bank would pass through parliament with bipartisan support are in tatters, after the Coalition said it would move an amendment that would mean external RBA board members automatically transition to a proposed new interest-rate setting committee.

Opposition Treasury spokesman Angus Taylor said “it is abundantly clear Jim Chalmers wants to spill the board and stack it with his mates”, and that “the Treasurer should not be given the option”.

“It’s imperative the entire current RBA Board is transitioned in the legislation to the monetary policy committee. Our Reserve Bank hasn’t always got it right. But continuity, stability and independence of interest rate setting is critical during these uncertain economic times,” Mr Taylor said.

With the Reserve Bank Reforms Bill yet to be introduced, a spokesman for the Treasurer said “we will continue consulting with the Opposition and are committed to working in a bipartisan way to pass this bill because the future of Australia’s central bank should be above politics”.

“Angus Taylor’s position puts him at odds with the comments this week by the RBA governor and the recommendations of the independent RBA review,” he said.

The notice that the Opposition will move amendments pre-empts the release of Friday’s Senate committee report on the legislative reforms, which could highlight Coalition committee members’ concerns with the proposed removal of the Treasurer’s (never used) veto power over interest rate decisions.

The Greens are also opposed to removing the veto power, and have flagged they would be willing to negotiate with Labor to help pass the RBA reforms without the Coalition. The Treasurer has signalled he is open to keeping the veto.

Under the changes recommended by last year’s sweeping review into the central bank, the existing board – which oversees the bank’s operation and decides monetary policy – will disappear.

In its place, two separate boards will be created – a purely governance body, and the other, a more technical board to make the six-weekly interest rate calls – a recommendation that has been criticised by two former central bank governors and former Treasurer.

The new monetary policy committee will still have nine members, consisting of the governor, deputy governor, Treasury secretary and six external members.

The guiding principle behind the reforms is that the new monetary policy committee would include more economic expertise and allow better challenge to the RBA staff view.

Under the current plan, and following the review’s recommendations, existing external board members would be given a choice of which new board they wished to join following the passage of the reforms.

RBA governor Michele Bullock has said she wants “continuity” of membership on both boards, but has not given a firm indication of what would meet that standard.

The spokesman for the Treasurer said “the government has been clear it wants to see continuity on the new RBA boards – that means continuity on both the monetary policy board and the governance board”.

Mr Taylor hit back against Dr Chalmers’ attempts to blame the Opposition for the breakdown of bipartisanship.

“The transition of the existing RBA Board to the new monetary policy committee has been consistently raised with the Treasurer and his office since the first meeting. Instead of working with the Coalition on this, the Treasurer has chosen to do the complete opposite,” he said.

Mr Taylor criticised Dr Chalmers’ appointments of two external board members with past union affiliations – former Fair Work Commission boss Iain Ross and company director Elana Rubin – saying the process did not meet the recommended requirements of the RBA review that they be assessed based on a transparent skills matrix.

“Then, earlier this month, Treasury advertised board positions for both the monetary policy committee and the governance committee, before the legislation has even been debated in parliament,” he said.

Leading economists have long warned the Reserve Bank risks “losing control of the cash rate” under the RBA review panel’s proposal to have voting external ­experts outnumber central bank officials.