20 April 2023

Review of the Reserve Bank of Australia

Today I am releasing the Review of the Reserve Bank of Australia, the first external review of our central bank and the operation of monetary policy in four decades.

The Albanese Government agrees in‑principle with all the Review’s recommendations and will now work with the RBA, the parliament and other stakeholders to implement them.

This Review, its recommendations and our response are all about ensuring the Reserve Bank has the best frameworks, objectives, processes and expertise.

Australia faces a complex and rapidly changing environment, and we need the most effective central bank and monetary policy framework to meet current and future economic challenges.

The Review found that the RBA is a well‑regarded institution, with high quality staff, that has served Australia well. It found that Australia’s monetary policy framework has contributed to good economic outcomes over the past three decades but identified a number of opportunities to strengthen it.

The Review makes 51 specific recommendations under 14 broader headings, grouped into 5 themes:

  1. A clearer monetary policy framework, with clear objectives and tools, and a well‑defined financial stability role
  2. Stronger monetary policy decision making and accountability, including a more expert Monetary Policy Board supported by better processes and greater transparency and accountability around decisions
  3. An open and dynamic RBA, with a more agile and empowering culture and more open and constructive debate
  4. More robust corporate governance, including the establishment of a new Governance Board to support and oversee management, and
  5. Steps to ensure RBA leaders drive institutional and cultural change.

Implementing these recommendations will ensure our monetary policy framework is the best it can be and boost confidence in our central bank.

The Government is committed to working with the Reserve Bank, Council of Financial Regulators, and other stakeholders to implement these recommendations, collaboratively and constructively.

Given the importance of the RBA’s independence, bipartisan support will be critical to implementing some of the recommendations through legislation.

Subject to consultations with the Opposition, the Government intends to introduce legislation to:

  • reinforce the independence of the RBA in the operation of monetary policy;
  • strengthen the RBA’s mandate and clarify that Australia’s monetary policy framework will have dual objectives of price stability and full employment; and
  • establish a separate Monetary Policy Board and Governance Board to ensure decision making and corporate governance arrangements are as effective as they can be.

I will work with the RBA Board to agree a new Statement on the Conduct of Monetary Policy to be finalised before the end of 2023.

The Statement will reaffirm the Government’s commitment to the independence of the Reserve Bank and support for the inflation targeting framework. It will also set out our shared understanding for strengthening decision making, accountability and transparency in monetary policy decisions, in line with the Review’s recommendations.

The Government recognises that the RBA operates monetary policy independently, and as such some of the substance of the Review’s recommendations will fall to the RBA to implement.

The Government supports the RBA taking action on those matters concerning their internal operations.

The Government will institute more open and transparent processes for appointments of external members to the RBA Boards. We have already taken steps in this direction through an expression of interest process for the latest round of board appointments.

I will write to the Council of Financial Regulators to encourage them to begin work to renew the memorandum of understanding to reinforce our already strong cooperation on promoting financial stability.

I would like to thank the Review Panel – Professor Carolyn Wilkins, Professor Renée Fry‑McKibbin, and Dr Gordon de Brouwer PSM – for their work and the more than 1,500 stakeholders who contributed to this process, and the Reserve Bank Governor and Shadow Treasurer for the productive discussions we’ve had to date.

The Review is available on the Review of the Reserve Bank of Australia website.