The Reserve Bank of Australia (RBA) is set to undergo the most extensive overhaul in nearly three decades, as a result of a thorough governmental review.
The changes proposed are far-reaching, signifying a major shift in the operations of the bank.
As part of the 51 specific recommendations put forth in the Review, a panel of monetary policy experts will replace the current RBA board in setting interest rates. The board’s meeting frequency will also be reduced from 11 times a year to eight to alleviate financial pressures on households that are repeatedly affected by rate hikes. Additionally, the RBA governor will conduct a press conference after each meeting to provide clarity on decisions made.
Treasurer Jim Chalmers announced that the Albanese Government is in support of all the recommendations proposed in the Review in principle, and will collaborate with the Reserve Bank of Australia, the parliament and other relevant parties to ensure their effective implementation.
“This Review, its recommendations and our response are all about ensuring the Reserve Bank has the best frameworks, objectives, processes and expertise,” he said.
“Australia faces a complex and rapidly changing environment, and we need the most effective central bank and monetary policy framework to meet current and future economic challenges.
“The Review found that the RBA is a well‑regarded institution, with high quality staff, that has served Australia well. It found that Australia’s monetary policy framework has contributed to good economic outcomes over the past three decades but identified a number of opportunities to strengthen it.
“Implementing these recommendations will ensure our monetary policy framework is the best it can be and boost confidence in our central bank.”
Following its release, the RBA and Governor Philip Lowe welcomed the review.
“The Bank welcomes today’s release of the Review of the Reserve Bank and the government’s response,” the RBA said in a statement.
“The Review is comprehensive and covers the Bank’s objectives and responsibilities, the framework for monetary policy, the governance of the Bank and the way the Reserve Bank Board and the Bank operate. The Bank thanks the Review Panel and Secretariat for their work and all those who provided submissions.”
Lowe added that “the Review Panel rightly acknowledged the substantial contribution the Bank has made to Australia’s economic success and the skills and dedication of the staff.”
“It also acknowledged the RBA is highly regarded and respected in Australia and overseas. The recommended changes will build on that strong foundation and strengthen the Bank’s governance and decision-making processes,” he said.
“They will help us deal with the complex world in which we operate as we strive to promote the economic welfare of the Australian people.”
The evaluation comes in the wake of mounting criticism directed towards the RBA due to its swift implementation of interest rate hikes and its pre-pandemic operational strategies, which have come under scrutiny amidst the global economic downturn.