After the Reserve Bank's rate decision on Tuesday, governor Bullock told the media that all decisions regarding the new boards' configuration will ultimately rest with the Treasurer.
However, Bullock did reveal that in her discussions with Chalmers, she expressed a desire for continuity on both boards.
She also disclosed that she, Treasury Secretary Stephen Kennedy, and an independent member have been tasked with developing "ideas" and "options," which have since been presented as recommendations to the Treasurer.
“The only thing that I have said, and I stick by it, is that I would like continuity on both boards, that’s the only comment I’ve made,” Bullock said.
“The matter of the appointments, that’s a matter for the Treasurer. Obviously, I have been speaking to the Treasurer for the past year because the legislation has been on foot for all of that time, but ultimately the appointees will be matters for the Treasurer.”
In a separate media conference, Chalmers said the appointments the government is seeking to make are “first class and first-rate people”.
“We have already – around the middle of the year – had conversations with the opposition about the possible make-up of the two boards,” the Treasurer said.
“There’s a process which has been adhered to, which recommends a short list to the government.
“We intend to pick from that shortlist and we intend to consult in a genuine way even with our political opponents, even though they haven’t supported this legislation through the Senate.”
Chalmers also disclosed that a couple of appointments will be announced in the coming days.
Originally slated to take effect on 1 July, the legislation implementing the findings of an independent review into the RBA had been delayed in the Senate. The reforms appeared to be on the brink of collapse, but in a marathon sitting earlier this month, the government managed to negotiate a deal with the Greens to secure the central bank’s biggest shake-up in over three decades.
Besides a new two-board system, the RBA will also get a new objective – to “promote the economic prosperity and welfare of the people of Australia, both now and into the future”.
The law also confirms that monetary policy should have dual objectives of price stability and contributing to full employment, and clarifies the RBA’s responsibility to contribute to financial system stability.
‘Unfortunate’ development
Commenting on the reforms earlier this month, AMP’s chief economist Shane Oliver said it is “unfortunate” that the bank is set to undergo these changes.
A staunch opposer of the reforms, Oliver said in a market update: “This is unfortunate as there is no evidence that the RBA review’s proposal to set up a separate interest rate setting board would lead to better outcomes or that it’s world’s best practice.”
Instead, Oliver said it could reduce RBA’s accountability and create confusion.
“The lack of bi-partisan support for the reform also leaves it weakened and the Coalition is right to be concerned that the government could stack the interest rate setting board with soft-on-inflation economists which would undermine the RBA’s inflation fighting credibility and lead to higher than otherwise interest rates in Australia over the long term,” the chief economist said.
“If the new rate setting board with government appointed members is set up by 1 March next year, as indicated in the legislation, and then the RBA delivers a pre-election rate cut in April after having left rates on hold in February, it could lead to questions about the independence of the new board and dent the RBA’s credibility.”
