Bullock backs Chalmers in stoush with Coalition over RBA board
Reserve Bank governor Michele Bullock has backed Treasurer Jim Chalmers in his fight with the Coalition over whether some existing RBA board members should be stripped of their interest rate setting powers.
The independent RBA review’s signature recommendation was the creation of separate boards for interest rate setting and governance. While the Coalition supports the recommendation in principle, the major parties are at loggerheads over which board the six current external RBA board members should serve on.
Shadow treasurer Angus Taylor has demanded all existing RBA board members be appointed to the new interest rate setting board, which will be established on July 1 at the earliest.
The Coalition fears the treasurer wants to use the overhaul to shift Coalition-appointed RBA board members to the governance board in a bid to add Labor-aligned figures to the more powerful monetary policy committee.
Dr Chalmers has rejected Mr Taylor’s request, arguing that some existing RBA board members needed to move onto the new governance board in the interest of organisational continuity.
Ms Bullock backed in Dr Chalmers’ position at a press conference on Tuesday, saying she would like “continuity with respect to both boards”, meaning she would like at least one current RBA board member to move to the governance board.
“I have no particular firm views on numbers,” Ms Bullock added.
Addressing Ms Bullock’s intervention, Mr Taylor said the entire rationale for the governance board’s creation was because the RBA review found the current board rarely considered governance issues.
“Further, the nature of the legislation gives the Treasurer the flexibility to appoint members to both boards concurrently,” Mr Taylor added.
Reform in jeopardy
The impasse between the two major parties has complicated the passage of the RBA reform legislation through the Senate.
Dr Chalmers has sought Coalition support for the RBA reform legislation, given his stated preference not to negotiate with the Greens on what he hopes will be a bipartisan package.
Liberal backbenchers say Dr Chalmers’ appointment of two former union officials, Elana Rubin and Iain Ross, to the RBA board in April 2023 justifies their fears about board appointments.
The Coalition is also concerned that shifting multiple board members to the governance board could change the direction of monetary policy at a pivotal moment in the most rapid tightening cycle in decades.
The RBA review found the current board members as a collective lacked the capacity to sufficiently scrutinise or challenge the central bank governor on interest rate decisions. The RBA board did not vote against a single recommendation of the RBA executive in at least the past decade.
The RBA wrote in its submission to a Senate inquiry in February that it would like “a high degree of continuity of membership” on the monetary policy board during 2024 and 2025, suggesting a preference for only about one or two existing RBA board members to shift to the new governance board.
Some existing RBA experience on the new governance board may also be desirable, to manage risks such as the refurbishing of the Martin Place headquarters that has blown out by a further $350 million to $850 million after the extent of hazardous asbestos inside the building was underestimated.
Dr Chalmers has already started the process for recruiting new board members, with Treasury publicly advertising this month for additions to both the interest rate setting and governance boards.
Read more about the RBA rate decision
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- Bullock backs Chalmers in stoush with Coalition over RBA board Dr Chalmers and shadow treasurer Angus Taylor are at odds over whether some existing RBA board members should be stripped of their interest rate setting powers.
- Chanticleer | The next big question investors must ask about the RBA Interest rates will fall. But we’re not going back to the days of super low rates – and that poses a fascinating question for the Australian economy.
- Rate cut hopes grow after RBA softens rhetoric Investors seized on subtle changes to the Reserve Bank’s monetary statement, declaring a subtle “dovish” shift.
- What the cash rate means for REITs While further property write-downs may come in June, there may be little more beyond that as the outlook for interest rates turns favourable, says Citi.
- RBA to watch for ‘spillover’ from aged care pay rise Michele Bullock will be alert to the effects from the “very worthy” 14 per cent wage increase but says this is unlikely to shift forecasts for inflation.
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