Changes to Australia’s central bank are still on the cards, despite an ultimatum from the Greens daring the government to intervene on interest rates.
The Greens have withheld support for reforms to the Reserve Bank unless the financial institution cuts interest rates or the government enacts never-before used powers and steps in to lower the cash rate.
Finance Minister Katy Gallagher labelled the stance from the Greens as crazy.
“We remain committed to the reforms, the bank supports the reforms, they’re important reforms to strengthen the independence of the RBA,” she told reporters in Canberra on Monday.
“(The Greens) suggest that we do the job of the RBA, basically remove its independence, cut interest rates and then they’ll pass a bill that strengthens its independence.”
The reforms would split the central bank’s board into two, so one could focus on monetary policy and the other internal administration, with the treasurer able to appoint members.
They were recommended in an independent review commissioned by former Liberal treasurer Josh Frydenberg.
The opposition has dealt itself out, arguing the treasurer could stack the monetary board with union officials.
With the coalition arguing against the changes, the only way for the government to get through the reforms is to gain the support of the Greens.
Senator Gallagher said the government remained resolute in wanting to get the reforms through.
“I can’t think for a reason why the federal opposition would not support strengthening the independence of the RBA, were it not for politics, and the Greens are just crazy,” she said.
Greens senator Nick McKim said the government had the ability to lower interest rates to make it easier for mortgage holders.
“The treasurer has the power to step in, he’s just not using it. The Reserve Bank could act, but they are not acting,” he said.
Senator McKim said he didn’t care whether Treasurer Jim Chalmers used his big stick to force an early cut or the central bank governor decided to slash the cash rate herself.
Independent economist Saul Eslake also lashed out at the Greens’ ultimatum.
“It’s ignorant and arrogant for McKim to think that he knows better how to set interest rates than the governor of the Reserve Bank or the Reserve Bank board,” he said.
“It’s incredibly ignorant and it’s incredibly arrogant and it’s a reminder of why this kind of power doesn’t exist in most other countries.”
Reserve Bank governor Michele Bullock has flagged rate cuts are unlikely in 2024.
High interest rates were robbing Australian mortgage holders in a cost of living crisis and flowing into the the banks’ already “eye-wateringly large profits”, Senator McKim argued.
The Greens would back the reforms in their current form as long as Labor retains the power allowing the treasurer to overrule the bank and a separate clause allowing the RBA to direct money to productive parts of the economy.
The RBA is meeting on Monday and Tuesday to determine whether it will drop interest rates ahead of monthly inflation figures on Wednesday.
The 4.35 per cent cash rate is tipped to remain unchanged.
By Dominic Giannini in Canberra
