Australia’s Central Bank Reform in Doubt as Opposition Says No

Ben Westcott
·3-min read

(Bloomberg) -- Australian Treasurer Jim Chalmers may be forced to negotiate with minority parties to secure passage of his overhaul of the Reserve Bank after the Liberal-National opposition said it wouldn’t back the changes.

Most Read from Bloomberg

Shadow Treasurer Angus Taylor said Tuesday that he had written to Chalmers to inform him that the opposition would not be supporting the legislation, including splitting the current board into a new monetary policy committee and governance board.

Taylor has said he has “deep concerns” about the motives of the government. Asked whether there were any circumstances in which he would vote for the legislation, he said “no” during a press conference in Canberra. “There’s been more than enough time,” he said. “I think it’s time to move on.”

Speaking earlier Tuesday, Chalmers said he was disappointed but not surprised that the center-right opposition had rejected his reworked offer on the RBA reforms. The treasurer said he had agreed to compromise on six different points of contention before Taylor’s decision to step away.

“We’ll consider the next steps,” Chalmers told a press conference at Parliament House in Canberra. “All options are on the table, but my preference hasn’t changed. I prefer a bipartisan outcome in the senate.”

The treasurer said he would rather negotiate with the minority Greens party than abandon the proposed changes to the central bank altogether.

Chalmers had originally sought the backing of the opposition in order to avoid dealing with minority parties that might seek more radical changes. Taylor’s decision to rule out a deal is a setback for the treasurer given overhauling the central bank is one of his signature reforms.

The opposition was initially supportive of the changes to the RBA that were proposed by an independent review. However, Taylor more recently demanded that all current board members be transferred to the monetary policy committee to avoid giving Chalmers the opportunity to make a lot of new appointments. The treasurer had wanted current directors to have the option of joining either the committee or the governance board.

Chalmers last month announced a compromise under which everyone on the current board would shift to the monetary policy committee unless they indicated in writing a willingness to switch to the governance board.

“The government’s amendments leave open the option for a stitch up of the Reserve Bank board,” Taylor said in a statement. “Recent public comments from not only the treasurer, but other senior Labor figures in an attempt to blame the RBA for their own economic failures, are deeply unsettling.”

In the past week, Chalmers blamed RBA interest-rate increases for Australia’s anemic growth, saying the hikes were “smashing the economy.” That was followed by Labor party president and former Treasurer Wayne Swan accusing the central bank of “putting economic dogma over rational decision-making.”

Governor Michele Bullock has said the RBA sees little prospect of a rate cut this year and hasn’t ruled out another hike as it struggles to control inflation.

The RBA’s dual board framework was intended to be in place by mid-2024.

Governor Bullock has basically sided with the government in the debate, telling a parliamentary panel last month that she’d prefer some degree of “continuity” on both boards.

“Personally, I think if we can achieve continuity by some people going on to the monetary policy board and one or two going across to the governance board, that would be my best-case scenario.”

--With assistance from Swati Pandey.

(Updates with shadow treasurer’s comments.)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.

Latest stories