Labor has opened a rift with the Coalition with the appointment of two new Reserve Bank board members in the wake of a landmark review.
The federal government on Thursday released the first external review of Australia’s central bank and the operation of monetary policy in four decades.
With the Greens arguing the changes are a “backwards step”, Labor will need to work with the Coalition to legislate the review’s proposals with the aim of getting new settings in place to start on July 1, 2024.
A key recommendation is for the RBA to have two boards instead of one.
A monetary policy board with greater economic expertise will meet eight times a year, instead of monthly, to allow more time to consider issues and data.
A governance board with an external chair will be appointed to oversee the bank’s organisational strategy, finances, staff planning and risk management, with no role in monetary or payments policy or financial stability.
Treasurer Jim Chalmers on Thursday named former Fair Work Commission president Iain Ross and businesswoman Elana Rubin as new board members, in a bid to diversify the RBA’s range of expertise.
Dr Ross is a former Fair Work Commissioner and Ms Rubin a former head of Australian Super. Both also have past links with the Australian Council of Trade Unions.
Cabinet minister Ed Husic said it was important the RBA considered a broader range of factors when making its decisions.
“I do think where decisions have an impact… it’s a healthier decision when you have that balance,” he told ABC radio on Friday.
“There needs to be deeper structures for people to have that sense of a say and an influence in decision making.”
However, opposition treasury spokesman Angus Taylor said the Coalition was disappointed with the appointments, despite the need for intellectual diversity on the board.
“The review laid that out plainly and I endorsed the need for that,” he told ABC News.
“There is a clear process, a rigorous merit-based process that is laid out … and the government hasn’t followed it with its first two appointments.”
Another key recommendation was ensuring the central bank gives equal consideration to the objectives of price stability and full employment.
As well, board members and officials will be encouraged to provide more information to the public following concerns of a lack of transparency.
Cabinet minister Jason Clare said this would have a positive impact.
“The decisions that the bank makes doesn’t just affect those of us with a mortgage – it affects everyone in Australia and affects the prices of everything at the supermarket and affects the levels of employment,” he said.
The review called for the inflation target of 2-3 per cent to be retained, despite other central banks around the world having lower targets.
The government plans to introduce laws to parliament by the end of the year to reinforce the independence of the RBA by removing the government’s right to veto its decisions.
The laws would also create the monetary policy and governance boards and clarify the dual objectives of keeping inflation down and full employment.
Dr Chalmers plans to release a new statement on the conduct of monetary policy before the end of 2023, which would reaffirm the bank’s independence, support the inflation target and set out commitments on transparency and accountability.
– AAP
