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 overhaul which would see a separate body established within the bank to deal with interest rate decisions.
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, Treasurer Jim 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,” Mr 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 this week, Mr 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 this 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,” Mr 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.”
Last week, the Treasurer 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.
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.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
