Australia’s Reserve Bank board will be split between a special panel to handle interest rates and one dealing with currency issuance and other tasks, as recommended by the first formal review of the central bank since the 1990s.
The treasurer, Jim Chalmers, is expected to release the full review report, titled “An RBA fit for the future”, on Thursday. He said he would work “across the parliament and with the RBA” to implement in principle all 51 of the review’s recommendations.
“The review is all about ensuring Australia’s central bank and monetary policy arrangements are as strong and effective as they can be into the future,” he said.
The Albanese government will reaffirm its commitment to the RBA’s independence and support its inflation-targeting framework. The central bank sets interest rates at levels aimed at keeping inflation within a 2% to 3% band over time, a target that Guardian Australia understands will not be altered after the review.
One key change recommended in the 294-page review is the creation of a separate board to handle monetary policy, leaving more routine roles such as money issuance and audits of the RBA to a governance board. Such a move would echo the division of skills within the central banks of Canada and the UK, among others.
Canada has a separate governing council of six members drawn from the senior ranks of the Bank of Canada. The Bank of England’s 13-member financial policy committee includes six from the bank itself and five outsiders, selected “for their experience and expertise in financial services”. The other two members are the chief executive of the financial conduct authority and one non-voting member from the UK Treasury.
The RBA’s board now has nine members. The governor, Philip Lowe; the deputy governor, Michele Bullock; and the Treasury secretary, Steven Kennedy, are joined by six others, typically from the business sector with one academic. Unions and community groups have said they would like to see representation broadened.
Chalmers is expected to name two external RBA board members on Thursday to replace the outgoing members Wendy Craik and Mark Barnaba. Neither sought reappointment.
The treasurer launched the review last July. The three-person panel was led by the Australian National University professor Renée Fry‑McKibbin and included Carolyn Wilkins, an external member of the Bank of England’s financial policy committee and ex-deputy governor of the Bank of Canada, and Gordon de Brouwer, a secretary for public sector reform.
The review’s scope was to examine the RBA’s performance against four measures: its objectives, policy implementation, governance processes and public communications.
The RBA has lately been criticised for its signalling about the future path of interest rates. Lowe has admitted the bank erred in late 2021 by saying official interest rates were unlikely to rise until as late as 2024.
In its answers to the review, the RBA noted the criticism about the “earlier-than-expected increase in the cash rate in May 2022”.
“While that forward guidance had been conditional on the state of the economy, it proved difficult to ensure that this was understood across all parts of the community and not perceived as a promise,” it said in its defence.
Some of the review recommendations will need legislative change, cooperation with the Council of Financial Regulators, or agreement of a new statement on the conduct of monetary policy between the RBA board and the government. Others would fall to the RBA itself to implement.
The opposition Treasury spokesperson, Angus Taylor, was given the report earlier this week and was also granted multiple briefings.
“It is enormously important Australia has an independent, credible and capable Reserve Bank,” Taylor said, adding that he had held ‘“regular and constructive discussions” with the review panel and the government.
“The Reserve Bank of Australia has served Australia well for a long period of time,” he said. “We want to make sure this crucial economic institution is maintained and that there are no distractions getting in the way of its core objectives.”
Lowe has also received a copy of the review and is due to provide comments from noon AEST, followed by questions and answers from the media.
The review panel received more than 1,500 contributions through interviews and submissions, focus groups and survey responses. It also consulted 137 global and local experts, including current and former RBA board and staff, parliamentarians and academics.
