He will also abolish a power the Reserve has held under its governing legislation since 1959 to direct the lending activities of private banks,which members of the extreme left and right have argued should have been used in recent years.
The review of the Reserve Bank,released in April,recommended sweeping changes to the institution,which,unlike its overseas peers,had not undergone an independent evaluation since the early 1980s.
The review was prompted following a series of articles by this masthead about the bank and its handling of monetary policy ahead of and during the COVID pandemic.
As revealed by this masthead at the weekend,the biggest single change will be the creation of a board that will set official interest rates,while a governance board will oversee the RBA’s day-to-day operations.
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The bank’s mandate will be narrowed to targeting inflation and contributing to full employment while its overarching focus will be to “promote the economic prosperity and welfare of the people of Australia,both now and into the future”. This had been one of the bank’s mandates since 1959.
But Chalmers will go further,including axing his own power to override a Reserve Bank decision in what amounts to the only ability a government has to directly interfere with monetary policy. The power has never been used,in part because of the reputational damage it would cause to the bank and treasurer of the day.