RBA reform hangs in the balance

On Tuesday (10 September), the future of the Reserve Bank of Australia (RBA) reform was brought to a halt after the Coalition (led by shadow treasurer Angus Taylor) opposed the bill that would see the central bank have two boards: one for monetary policy and another for governance.

The Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023 went to vote on Tuesday, and failed to gain support from the Opposition following concerns that the new board would comprise Labor-leaning candidates.

In a radio interview following the move, shadow treasurer Angus Taylor said that while the Liberals were “always up for anything that might strengthen the independence, credibility and capability of the Reserve Bank” he accused the Treasurer of having “waged war” on the central bank.

“I've said from the start that we would not support a sack-and-stack strategy with the board,” he told 2CC Breakfast radio.

Borrower
RBA reform hangs in the balance
by Annie Kane•14:35 PM, 10 Sep 2024•8 minute read
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The Greens are urging the Treasurer to use his powers to bring down interest rates, in exchange for them backing the RBA board reform.

The Australian Greens have suggested they would help the government pass its bill to reform the central bank of Australia if the federal treasurer steps in and lowers the cash rate.

On Tuesday (10 September), the future of the Reserve Bank of Australia (RBA) reform was brought to a halt after the Coalition (led by shadow treasurer Angus Taylor) opposed the bill that would see the central bank have two boards: one for monetary policy and another for governance.

The Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023 went to vote on Tuesday, and failed to gain support from the Opposition following concerns that the new board would comprise Labor-leaning candidates.

In a radio interview following the move, shadow treasurer Angus Taylor said that while the Liberals were “always up for anything that might strengthen the independence, credibility and capability of the Reserve Bank” he accused the Treasurer of having “waged war” on the central bank.

“I've said from the start that we would not support a sack-and-stack strategy with the board,” he told 2CC Breakfast radio.

“It's clear that that's what the Treasurer wants. The reforms as he's drafted them, leave it open for him to do exactly that. There's a real potential here for a stitch up. And at a time like this, the most important point here, is we need every weapon we have fighting inflation and high interest rates in this country,” he said.

Taylor continued: “The government's given up the ghost. It's on to blame-shifting and excuses and so right now destabilising the Reserve Bank is absolutely the wrong way to go,” he said.

“The Reserve Bank has become a punching bag for the government, which is why we're just not prepared to work with a government that has this kind of mindset on these issues.”

Speaking after the decision, Treasurer Jim Chalmers angrily hit back at the shadow Treasurer’s move, stating: “The position that has been reported from the Coalition is irresponsible, it’s disappointing, but it’s not especially surprising given Peter Dutton’s pathological negativity and Angus Taylor’s weakness.

“The Reserve Bank’s reforms are all about making the RBA more independent, not less independent.

“The position that the Coalition has taken shows that it has absolutely no idea and absolutely no economic credibility. I tried to take the Shadow Treasurer seriously, even though nobody else appears to,” he told journalists in a media briefing.

Chalmers added that he had agreed to several changes in the bill over the last 18 months (and following the consultation period), including that all current board members move to the monetary policy board unless they don’t want to.

“I have accommodated the Shadow Treasurer on all 6 of the issues that he raised in the consultation on this really important legislation,” Chalmers continued.

“I dealt with him in good faith for the best part of a couple of years. I did genuinely put a premium on bipartisanship, but there’s only so much that you can do. I’d even started to consult him on possible appointments to the boards, so he knows that I have absolutely no intention of making political appointments to these boards.”

The federal Treasurer said that given he has not been able to secure the vote of the Coalition, he would be open to negotiating with the Greens to help the bill pass through the Senate.

Chalmers said: “My preference has always been and continues to be a bipartisan outcome between the 2 major governing parties in the Senate… That’s because I think that these changes, which are all about enhancing not diminishing the independence of the Reserve Bank, should endure beyond changes of government. Ideally the major parties would both be signed up to them.

“I’ve been doing my best to ensure a bipartisan outcome. That’s still my preference.”

While Treasurer added that the government “had not been seriously negotiating with the Greens on it” (as he was hoping for a bipartisan outcome with the major governing parties), he alluded to the fact that conversations would be now starting with the Greens.

“ Unfortunately, the position that the Coalition has taken deals the minor parties into the conversation more than they should be in my view. And that’s an unfortunate development,” Chalmers said.

He told journalists: “Obviously we’ll now consider the next steps and we’ll make those next steps clear in time.”

What do the Greens want?

The Greens have said that they would want to see the Treasurer use his powers to bring down interest rates (as per Section 11 of the RBA Act, which the Treasurer has said he would seek to retain and “focus it more appropriately”), with the party stating they were “continuing to smash mortgage holders and renters across Australia”.

“High interest rates are crushing mortgage holders and renters. Jim Chalmers needs to step in now to give them relief,” Greens Economic Justice Spokesperson Senator Nick McKim said.

“According to Jim Chalmers himself, the Reserve Bank has smashed the economy. Dr Chalmers has the power to reduce interest rates, and he must act before more damage is done,” he said.

“Given the Coalition's decision today, and Dr Chalmers’ comments, the Greens are ready to engage in good faith with the Treasurer.”

McKim continued: “While the Greens are willing to work with the Treasurer, it’s crucial for the power of a democratically elected government to override decisions of the RBA to be maintained.

“Removing democratic oversight over the RBA would be Labor’s final capitulation to the power of capital, and to the neoliberal agenda.”

“Section 11 gives the Treasurer the ability to intervene to override the Reserve Bank when necessary. Dr Chalmers should use that power now to reduce interest rates and retain it so it can be used in the future.”