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The AFR View

The AFR View

RBA shake-up must maintain spirit of central bank independence

The new era in Australian central banking should encourage better monetary policy decision-making. But that hinges on whom the treasurer picks to sit on the new interest rate board.

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Just a few months ago, Treasurer Jim Chalmers’ bill to shake up the governance of the Reserve Bank of Australia by establishing a separate board responsible for determining interest rates appeared dead in the water. But it was rescued and passed amid last week’s legislative blitz in the final sitting days of the year in Canberra.

The Coalition withdrew support for the changes in September, citing fears Labor would stack the new monetary policy board with political appointees. Last Wednesday, the Greens suddenly dropped their condition that the treasurer invoke a never-before-used power to order the central bank to cut interest rates. The Greens’ change of mind, and the backing of several cross-bench senators, have paved the way for the biggest change to how Australia’s independent central bank operates in decades.

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