Australia nears wide-ranging shake up of its central bank

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 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.

(Reporting by Wayne Cole; Editing by Shri Navaratnam)