The federal government will introduce legislation in parliament this week to overhaul the Reserve Bank of Australia.
Treasurer Jim Chalmers is set to axe his power to override Reserve Bank decisions on interest rates.
Mr Chalmers will use new legislation this week to repeal the Treasurer’s power to overrule monetary policy decisions.
As part of the bill, the bank will also establish a Monetary Policy Board and a separate Governance Board.
The reforms are in response to a review of the RBA – which was released in April.
The Federal Government will introduce legislation this week to overhaul the Reserve Bank of Australia (RBA) in its biggest shake-up since the central bank’s foundation.
The government-commissioned independent review of the bank in April recommended sweeping changes including a reduction from 11 interest rates board meetings a year to eight, with each to be held over two days.
Among other changes on the way are a new governance board to oversee day-to-day operations and payment systems, such as Apple Pay.
The legislation will also axe the powers of Treasurer Jim Chalmers to overturn an RBA decision. And out will go the central bank’s authority to directly lend to particular industries or companies.
While the RBA changes promise to have big economic and political ramifications, the question most Australians are asking is: Will this stop the RBA from raising rates?
Experts say reforms aren’t so much about interest rate decisions themselves, but more about how those decisions are reached.
Dr Steve Kourabas, a senior lecturer at Monash Law School and Deputy Director of the Centre for Commercial Law and Regulatory Studies, told 9news.com.au earlier this year the review found the bank had perhaps been too aggressive in raising the cash rate.
“It’s really about how the RBA makes its decisions on monetary policy, and what information it uses to come to those decisions and how it communicates those decisions,” he said.
And it’s unclear what the impact of having fewer board meetings a year will have on interest rate decisions.
One theory suggest that could lead to larger jumps in the cash rate given there are fewer chances to change it – something RBA Michele Bullock has alluded to in the past.
But many experts don’t think bigger raises – or falls – are guaranteed under the new structure.
Australian mortgage holders will have to wait until the first RBA board meeting under the new regime in early February for the first signs.
(SKY NEWS/ 9 NEWS)
