Review into Australian central bank recommends new board structure
FILE PHOTO: Pedestrians walk past the Reserve Bank of Australia building in central Sydney, Australia, February 10, 2017. REUTERS/Steven Saphore/File Photo/File Photo/File Photo/File Photo
SYDNEY (Reuters) – The Australian government will reveal details of an external review into the operation of the country’s central bank on Thursday, including recommendations to establish separate boards to manage monetary policy and governance.
Treasurer Jim Chalmers is expected to announce in-principle agreement to all 51 recommendations made by an independent review into updating how the Reserve Bank of Australia (RBA) operates and formulates policy, according to extracts of a planned announcement seen by Reuters.
The review recommends splitting the current policy-setting board into a specialist one for monetary policy and another for governance. The current board consists of two RBA staff, the Treasury secretary and six external members.
Importantly for the confidence of financial markets, Chalmers is expected to reaffirm the independence of the central bank from government control and support for its focus on inflation targeting.
Chalmers, who set up the review last year with an eye to making the RBA “fit for the future”, is also expected on Thursday to announce replacements for two of the external board members who are stepping down this year.
Chalmers said earlier this week he had already discussed the review with RBA Governor Philip Lowe. Some of the recommended changes can be implemented by the RBA itself, while others will need legislative action.
Lowe’s (NYSE:LOW) seven-year term ends in September and there is speculation it will not be extended as it was with his two predecessors.
Lowe’s future has been under a cloud since telling Australian borrowers late in 2021 the official cash rate was unlikely to rise from a record low of 0.1% until 2024.
Instead, inflation surged past expectations and forced the bank to start hiking in May last year, and it has lifted rates by 350 basis points to 3.6%.
Chalmers has said a decision on the governor would be made mid-year.