© Reuters. FILE PHOTO: Pedestrians walk past the Reserve Bank of Australia building in central Sydney, Australia, February 10, 2017. REUTERS/Steven Saphore/File Photo
SYDNEY (Reuters) – Australia’s Treasurer on Monday said he was close to announcing details of a wide-ranging review into the country’s central bank which would require legal changes for some steps, underlining the scope of the shake-up.
Treasurer Jim Chalmers said the independent review had provided 51 recommendations for changing how the Reserve Bank of Australia (RBA) operates and formulates policy.
Chalmers has already consulted on the proposals with RBA Governor Philip Lowe and will be meeting with opposition lawmakers with the aim of releasing the government’s response to the review this week.
“There are some recommendations which would require legislative change,” Chalmers told a media conference. “There are some that would require the governor and the board to change the way that they go about things at the bank.”
Lowe’s (NYSE:) future has been under a cloud since telling Australian borrowers late in 2021 that interest rates were unlikely to rise until 2024.
Instead, inflation surged past expectations and forced the bank to start hiking in May last year, having now lifted rates by 350 basis points to 3.6%.
Lowe’s current seven-year term ends in September and there is speculation it will not be extended as it was with his two predecessors.
The review is expected to have recommended changes to the RBA’s policy making board, which currently consists of two RBA staff, the Treasury secretary and six business people.
This could include a separate specialist committee to advise on or even decide monetary policy and/or a change to how board members are chosen and pointed.
The government has already broken with tradition by publicly advertising for applicants to two board positions.
Most analysts doubt the review will radically alter the RBA’s current inflation target of 2% to 3%, but may tweak the language of its goals which include a stable currency, full employment and the welfare of the Australian people.
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The Reserve Bank of Australia (RBA) is preparing for a wide-ranging shake up of its operations which could see a dramatic change in the structure, responsibilities and size of the organisation.
The restructuring, to be announced early next year, could be the biggest overhaul in the RBA’s 99-year history and could involve several new policy areas and areas of responsibility. It follows a review ordered by the government in 2016 which asked the RBA to examine the feasibility of a more comprehensive, centralised economic and financial regulatory system.
At present, the RBA oversees the country’s monetary policy, manages its foreign exchange reserves, supervises financial institutions and sets the goals for the banking system. However, the review also notes that other areas – such as cyber security and payment systems, housing finance, competition policy and environmental regulation – have emerged as important but potentially complex new policy areas in Australia’s economy.
The review also highlights how global financial conditions have become increasingly interconnected and volatile, and how the structure of the central bank might need to change in order to better address emerging challenges in the Australian economy.
The RBA could be in for major changes including the formation of new divisions to manage different types of policy, such as competition or environment, and bringing in more staff to help with policymaking. The RBA could also increase its focus on data and risk analysis, while devoting resources to international engagement and negotiations on global economic policy issues.
The shake up could also involve merging the central bank’s current structure of administrating bodies into one. It is not yet clear, however, whether such a move would be made, due to the complexity of the proposed changes.
The results of the review will be announced early next year and any major changes to the RBA’s structure will be implemented over the next two years. These important changes to the central bank are likely to shape the future of Australia’s economy for many years to come.
