Federal Treasurer Jim Chalmers announces historic Reserve Bank review

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The Reserve Bank will have its monetary policy reviewed in an independent review, the first since the 1980s.

Federal Treasurer Jim Chalmers said the terms of reference for the review have been finalized and a three-member independent panel has been appointed to lead it.

Watch: Jim Chalmers talks Reserve Bank review with Sunrise

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The review will be led by an external member of the Bank of England’s Financial Policy Committee, Professor Carolyn Wilkins, leading macroeconomist Professor Renee Fry-McKibbin, and Public Sector Reform Secretary, the Dr. Gordon de Brouwer.

The independent review will examine the monetary policy arrangements, including whether the bank’s current inflation targeting framework is appropriate.

Chalmers said the review would be the first undertaken since the current monetary policy was instituted in the 1990s.

Jim Chalmers speaking with David Koch on Sunrise. Credit: Sunrise

“I think over six decades or more it’s served Australia pretty well, but shouldn’t go beyond the kind of review we’re announcing today, which is to give them the best set of arrangements , goals and mandates, the best set of governance to make sure they can make the right decisions going forward,” Chalmers said. Sunrise host David Koch.

“This is not an exercise in guessing the Reserve Bank, this is not pointing fingers or shooting at the governor or his board, this is about giving him the best global practices for the future.

“That’s why I’ve put together a top-notch panel to do this important work and that’s why I’ve worked with the bank to come up with the terms of reference that I’ll be announcing today.”

The headquarters of the Reserve Bank of Australia in Sydney. (Case) Credit: DEAN LEWINS/AAPIMAGE

The announcement of the review comes as the Reserve Bank governor prepares to deliver a speech at the Australian Strategic Business Forum in Melbourne on Wednesday.

The address, which will cover inflation and the future of money, comes amid warnings that inflation levels in Australia are set to rise further in the year ahead.

The Reserve Bank review is expected to produce its final report to the government, along with recommendations, by March 2023.

The review will also consult with economic experts from Australia and overseas, as well as former Reserve Bank board members. The public will also be able to submit proposals.

Chalmers said the review would be critical given the range of long-term challenges to the national economy on the horizon.

However, the RBA’s payment, financial infrastructure, banking and banknote functions will be excluded from the terms of reference of the review, as will the function of the Australian Prudential Regulation Authority.

Analysis conducted as part of reviews of other central banks, such as the US Federal Reserve, will also be considered by the independent panel.

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