Long-Delayed RBA Reforms Hit Fresh Setback

SYDNEY (Reuters) – Reforms to the Reserve Bank of Australia (RBA) faced challenges as Greens lawmakers demanded lower interest rates in exchange for their support for the legislation.

In a statement, the Greens asserted that they would not pass Labor’s RBA reforms until interest rates were reduced. They stated, “The Reserve Bank should lower interest rates tomorrow and if they don’t, the Treasurer should use his existing powers to bring down interest rates and relieve pressure on mortgage holders.”

The RBA is set to make its next policy decision on Tuesday. Interest rates have remained unchanged at 4.35% since November. Policymakers have largely ruled out a reduction this year, citing persistent inflation, which has frustrated borrowers.

The reforms, recommended by an independent review last year, include establishing a separate governance board alongside the current monetary policy board. The nine-member rates board would maintain six external members, which the Liberal-National opposition fears could favor the ruling Labor Party with friendly appointees.

Two weeks prior, the Liberal-National coalition opposed these reforms, prompting Treasurer Jim Chalmers to seek support from the Greens or independent lawmakers to advance the legislation.

Finance Minister Katy Gallagher criticized the Greens, stating, “We won’t work with that because that is crazy. It’s economically irresponsible and we won’t do it,” in an interview with ABC Radio.

The political tensions have left the reform legislation in uncertainty, preserving the existing status quo regarding the policy-setting board.

The RBA has implemented some of the independent review’s suggestions, including fewer but longer policy meetings and conducting press conferences after each decision. However, various recommendations remain undecided, such as requiring all board members to periodically discuss their policy perspectives.