Australian Govt's Attempt to Reform RBA Board Appears Close to Defeat

By James Glynn

SYDNEY--The Australian Labor government's effort to reform the central bank's policy-setting board appears close to defeat, with the Green Party demanding immediate interest rate cuts in return for its support for the changes in parliament, according to a report in the Australian Financial Review.

Treasurer Jim Chalmers has been seeking support from the Greens for his plan to modernize the Reserve Bank of Australia's board after the Liberal-National coalition withdrew its support earlier this month.

Chalmers wants to create a dual board system, with one presiding over monetary policy decisions, and the second dealing with governance only. The new policy board would include more monetary policy experts, improving the debate around interest rates.

The RBA sets interest rates independently of the government.

"The Reserve Bank board are not infallible high-priests of the economy who are above criticism," Greens Treasury spokesman Nick McKim told Chalmers on Sunday in a letter.

"That is why, by making lower interest rates a condition of our support, the Greens are consciously and deliberately putting the RBA into the center of political debate, where they belong," he added.

"Both yourself and the Reserve Bank governor have said you want this legislation passed. Now you both know what has to be done to secure these changes," he said.

The RBA board is widely expected to leave the official cash rate on hold at 4.35% when its two-day meeting ends on Tuesday, citing ongoing concerns about elevated core inflation.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

September 22, 2024 20:15 ET (00:15 GMT)

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