Australia to introduce legislation to overhaul central bank

AUSTRALIA’S government will introduce legislation this week to facilitate a planned major overhaul of the nation’s central bank that includes establishing a separate governance board.

The bill follows an independent review of the Reserve Bank in May which made 51 recommendations for change, some of which require modifications to the RBA’s operating law. So far, there has been general bi-partisan support for the overhaul.

Key changes Treasurer Jim Chalmers highlighted in a statement include:

- Mandating that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future”

- Confirming that monetary policy should have the dual objectives of price stability and contributing to full employment

- Repealing the power of the treasurer to overrule the bank’s monetary policy decisions

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The legislation will also contain provisions to set up a governance board to oversee the management of the RBA and clarify the RBA’s responsibility to contribute to the stability of the financial system, Chalmers said. 

The RBA review’s remaining recommendations are being implemented administratively by the government and the central bank, including through a new Statement on the Conduct of Monetary Policy. Chalmers added the government hopes to finalise the statement next month. 

One area the statement is expected to cover, RBA Governor Michele Bullock said on Wednesday, is whether the RBA should focus specifically on the 2.5 per cent mid-point of its 2 to 3 per cent inflation goal. BLOOMBERG