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Treasurer Jim Chalmers has quashed allegations made by former Reserve Bank governor Ian Macfarlane who has, in a recent media appearance, questioned the bank’s planned overall that would see a separate body established within the bank to deal with interest rate decisions.
An additional two new board members are expected to be appointed to the board structure (currently nine people; three RBA members and six non-executive members appointed by the Treasurer) to also bring more people into the decision making of the bank. This is expected to include those who specialise in economics, labour markets, and financial markets to provide “diverse perspectives and knowledge”.
Referring to the planned changes as “very bad policy” in a recent interview with the ABC, Mr Macfarlane said the proposals made by the RBA review will see the creation of a bank teeming with part-time board members with no on-the-job experience.
“I’m not objecting to broadening membership away from academic economists, that essentially just means we know even less about who is likely to be appointed,” he told the ABC.
Responding to Mr Macfarlane’s comments, Dr Chalmers said this week that “they don’t stack up”.
“He is not right to say that there is some kind of radical change to the composition of the RBA board. The same amount of external people will be on the board after the change as before the change,” Dr Chalmers said.
“They will be asked to make the same kind of decision. It is surprising to me that Mr Macfarlane wants to pretend otherwise.”
The RBA review, made public by the government in March this year, recommended an overhaul of the RBA’s decision-making processes, with a call to establish new, function-based boards.
Specifically, a monetary policy board – responsible for monetary policy decisions and oversight of the RBA’s contribution to financial system stability (except payments system policy) – would operate separately from a new corporate governance board.
Speaking on the matter last week, Dr Chalmers said: “The composition of the monetary policy board is the same as the composition of the current board, and therefore, it is not a radical change to have the same amount of external people taking this decision on behalf of the independent Reserve Bank Board.”
Mr Macfarlane also accused the government of immediately proceeding with the review’s recommendations, rather than allowing for a period of consultation.
The Treasurer denied these allegations last week.
“He [Mr Macfarlane] has also said that there should have been an opportunity after the release of the Reserve Bank Review for people to comment on it and provide feedback and for the government to consult – and that’s precisely what we have been doing,” Dr Chalmers said.
“I put out the Reserve Bank Review six months ago, in March of this year. We said at the time, we wouldn’t legislate until closer to the end of the year, and that’s to give people the opportunity to provide feedback and it’s to allow the government to consult with the Reserve Bank, with the Opposition and with others.
“And there was also a long period of consultation which led to the RBA review itself. And so once again, what we’ve seen here is a long period of consultation, I’m not sure why Mr Macfarlane has said otherwise.”
The Treasurer has also recently said that he is currently working through a “handful of issues” stemming from the review, including whether or not governor Michele Bullock should chair the new governance board.
“When I released the review … I said that I was supportive in principle of all of the recommendations,” Dr Chalmers said at the time.
“But one of the reasons why we put it out in [April] with a long amount – with a big amount of time between then and legislating towards the end of the year is I wanted to generate a lot of feedback and a lot of views, and we’ve been getting that, including in recent days.”
The Treasurer also admitted that term limits would be discussed further, alongside the influence of the governance board.
The implementation of key changes recommended by the RBA review is set to be one of the major challenges for new governor Ms Bullock, who recently started her term as governor.
Former governor Philip Lowe previously agreed to a number of changes recommended by the review. Namely, from 2024, the RBA board will meet eight times a year rather than 11, with meetings set to run longer to “provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy”.
The outcome of the meeting will be announced at 2:30 pm on the second day and the governor will hold a media conference at 3:30 pm.
The minutes of the monetary policy meeting will continue to be published two weeks after each meeting.
The 2024 Reserve Bank board meetings are as follows:
- 5–6 February
- 18–19 March
- 6–7 May
- 17–18 June
- 5–6 August
- 23–24 September
- 4–5 November
- 9–10 December
[Related: RBA releases meeting dates for 2024]
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