Australia Senate Passes Bill to Overhaul Central Bank Board
(Bloomberg) -- Australia’s Senate approved an overhaul of the Reserve Bank, which includes splitting its board in two, in a last-minute deal between Prime Minister Anthony Albanese’s government and the minority Greens Party.
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The upper house of Parliament passed the bill along with dozens of others in the final sitting day of the year on Thursday, after the Labor government suspended debate to pass as much of its legislative agenda as possible before the end of 2024.
Negotiations between the government and the Greens over the central bank legislation had earlier broken down over a demand by the minority party that Treasurer Jim Chalmers compel the RBA to immediately cut interest rates, a move that would undermine its independence.
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Greens Treasury spokesman Nick McKim announced the deal on Thursday afternoon, saying the government had agreed to retain the right for the treasurer to override a rate decision, as set out under Section 11 of the RBA Act.
“We now urge Labor to actually use that power to bring down mortgages and provide some relief for mortgage holders in Australia,” McKim told reporters in Canberra.
The Greens hold a large number of seats in the Senate, making their support vital for the passage of most major pieces of legislation.
An independent review of the central bank released last year had recommended scrapping Section 11, a power never used since the RBA was established in 1960. However, former treasurers and RBA governors later came out to say the government should retain this override as it’s important for elected representatives to maintain ultimate power over the bank.
Under the reforms, the RBA’s board will split into two bodies, a monetary policy committee and a board that manages day-to-day running of the central bank.
While some of the review recommendations have already been enacted, including Governor Michele Bullock holding post-meeting press conferences and fewer policy meetings, the splitting of the board required legislative change.
“These laws will reinforce the Reserve Bank’s independence, clarify its mandate, and modernize its structures,” Chalmers said in a statement Thursday.
The RBA amendments are among dozens of bills that the Labor government is pushing through the Senate on Thursday evening in what could be the last sitting day before an election next year.
The prime minister can call a five-week election campaign at any point ahead of May 17, and with the economy struggling under the weight of high rates and the budget set to slide back into deficit, expectations are mounting that Albanese will move fast to avoid a further possible drop in support for Labor.
In addition to the RBA reforms, legislation the government is hoping to pass on Thursday includes tax incentives for build-to-rent properties, the social media ban for children under the age of 16 and Albanese’s signature Future Made in Australia green economy initiatives.
Leader of the Opposition in the Senate Simon Birmingham described the process as “chaotic” as the government passed motions limiting debate time, enabling the upper house to progress as many laws as possible before the end of the sitting day.
(Updates with comments from Treasurer)
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