Treasurer Jim Chalmers will seek to reach common ground with the Coalition for any overhaul of the Reserve Bank in a bid to avoid a political fight that could undermine the institution’s independence and standing in financial markets.
Chalmers said he had been encouraged by his Coalition counterpart Angus Taylor’s attitude towards, and efforts to engage with, the independent panel that will deliver its review of the RBA to the treasurer on Friday.
The review, the first of the bank since 1981, is expected to make a series of recommendations to Chalmers that would, if implemented, deliver the biggest overhaul of the RBA since it embraced inflation targeting in the early 1990s.
Among the proposals canvassed by the panel include shifting interest-rate-setting power from the RBA board to a new committee of economic specialists, fewer meetings to discuss rate settings and regular press conferences by the bank governor to explain monetary policy decisions.
Chalmers, who will release the review in the coming weeks, said he hoped there could be agreement among the major parties on any changes to the RBA.
“I’ve got my differences with Angus Taylor, but I do want to say that he has been engaging with this Reserve Bank review panel in good faith and I appreciate it,” he told ABC radio.
“Ideally, we would come at the recommendations when they’re available in a bipartisan way – this should be beyond politics, it should be about the best Reserve Bank that we can possibly have for our country, no matter who’s in government.”
The panel has, in its few public comments about the review, noted the importance of a bipartisan approach to its recommendations. It is expected to deliver two sets of proposals – one that would require legislative change and one that would not.
A separate board to set interest rates would require a change to the RBA’s governing legislation. That act, in place since 1959, stipulates the Reserve Bank has two boards, with one responsible for banking and monetary policy while the other oversees the nation’s payments system.
However, a shift to fewer meetings could be done without new legislation as the current act is silent on how often the RBA board needs to convene.
The bank’s 2 to 3 per cent inflation target is not set in legislation but forms part of a separate agreement signed by the governor and treasurer of the day.
Chalmers said he expected some of the panel’s recommendations would require legislative change.
“If there are some that require a change to the act that we’re keen on progressing, then ideally, we would do that in a bipartisan way because I’m not just trying to make the Reserve Bank better, more robust to improve its structures and processes and objectives for the next few years, ideally, we’d make a meaningful change that lasts and the best way to do that is to get some bipartisanship,” he said.
Taylor, who has had regular discussions with the review panel, said it was vital Australia had an independent, credible and capable Reserve Bank.
He signalled the Coalition was open to a bipartisan approach to any reform.
“It is essential the review’s recommendations are agreeable for both major parties. This will ensure certainty around the outcome of this review. With inflation at its highest level in decades, this is in the best interests of Australians,” he said.
“The Coalition’s input into this review has been centred on ensuring the Reserve Bank’s monetary policy approach remains laser-focused on returning inflation to the 2 to 3 per cent target while recognising any governance reforms need to be balanced, preserve the Reserve Bank’s independence and bolster the Reserve Bank’s capabilities.”
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