JIM CHALMERS:
I want to thank the Review Panel, Gordon de Brouwer, Professor Renee Fry‑McKibbin and Professor Carolyn Wilkins, for this absolutely first‑class piece of work, and what their thinking and all of their work over some months means, is a roadmap, a plan for the future of the Reserve Bank of Australia, which I'm really proud to be releasing today. I want to also acknowledge more than 1,500 people who participated in the consultation process through interviews and submissions, and taking part in surveys as well.
This Review, its recommendations and our response is all about ensuring that the Reserve Bank is as strong and as effective as it can be now and into the future as well. This is about learning from the past to strengthen the Reserve Bank for the future. This is about bolstering the independence of the Reserve Bank, not diminishing its independence. And my goal here throughout is a world‑class central bank, which is more effective, more transparent, and more independent - calling on more expertise to make its important decisions. We want to make sure that Australia's monetary policy framework delivers the right decisions and makes the right calls for the Australian economy and for the Australian people. That's what has been motivating these reports, the work of the Review Panel and the thinking of the Albanese government for some months. The government agrees in principle with all 51 of the recommendations made in this report that I'm releasing today. The 51 recommendations are organised under 14 headings and grouped into 5 areas in particular - ensuring we have a clear and robust monetary policy framework, effective monetary policy decision making and accountability, and an open and dynamic Reserve Bank that facilitates constructive internal debate, more robust governance arrangements and steps to ensure the RBA leaders drive institutional and cultural change as well. And we will now work with the Reserve Bank, other regulators and stakeholders and the Parliament to implement these 51 recommendations in a collaborative and constructive way. We want to ensure that we have the best institutions and policy frameworks in place, because this is more important than ever, given the complex and more uncertain economic environment that we confront.
Now, the Reserve Bank, as the Review concludes, is a high quality institution. It has highly skilled and dedicated staff which have made and do make a significant contribution to Australia's economic performance over many decades. The Review aims to strengthen the Reserve Bank even further so that it's well‑equipped to deliver decisions and make decisions in what has become an increasingly complex and challenging environment. Some of the Review recommendations fall to the Reserve Bank to implement given it operates monetary policy independently. And I welcome the Reserve Bank statement today outlining their commitment to develop a plan to implement these recommendations in an effective way. Other recommendations will require legislative change, others will require work with the Council of Financial Regulators, and some will fall to the agreement of a new Statement on the Conduct of Monetary Policy between the Reserve Bank and the government via me as Treasurer. I intend to work closely with the Opposition and the crossbench to ensure we build the right institutions and frameworks to support a better future and a better central bank as part of that. Subject to those consultations and that support from the Opposition, in particular, we intend to introduce legislation to reinforce the independence of the Reserve Bank by removing the government's right to veto its decisions. We intend to introduce legislation to strengthen the RBA's mandate, and clarify that our monetary policy framework has dual objectives of price stability and full employment. And we also will seek to establish separate monetary policy and governance boards to strengthen expertise decision making, and bring us more into line with world's best practice. We will also update the Statement on the Conduct of Monetary Policy. This statement is an agreement between myself and the RBA. When I came into this role less than 12 months ago, I put off releasing a new statement so that we could reflect the outcomes of this Review in the new statement, which hasn't been updated since 2016. And the updated statement will reaffirm our commitment to the independence of the Reserve Bank and our support for the inflation targeting framework. It'll also set out our shared understandings for strengthening decision making accountability and transparency in monetary policy decisions in line with the recommendations of this review that I'm releasing. It is my hope that we can work towards having an agreed statement in place by the end of the year, and that the recommendations of the Review can be in place ready to implement and ready to go by the middle of 2024.
Now, as I said before, there are some areas that fall to the RBA to implement themselves. And I do again want to acknowledge the Governor's statement today that he will work with his colleagues to develop a plan to implement those changes. The Review also made a number of welcome suggestions to make appointments of external members to RBA boards more open and transparent, and we support these recommendations as well. In fact, we have already taken steps in this direction in anticipation by running an expression of interest process for the first time, to help inform the latest round of board appointments. And today, I'm really pleased and really proud to announce that the government has appointed Dr Iain Ross and Ms Elana Rubin, as part time members of the Reserve Bank Board. Dr Ross will bring a deep understanding of labour markets and economics having led the Fair Work Commission, and as a private lawyer and as an advocate for workers as well. Elana Rubin has over 20 years of corporate board experience across diverse sectors of our economy, and extensive experience in financial services, infrastructure, property, tourism, and manufacturing, as well. Iain Ross and Elana Rubin are highly capable people and I have absolutely no doubt that they will make important and excellent contributions to the Reserve Bank Board going forward. I want to thank Wendy Craik and Mark Barnaba for the contribution that they have made to the board over a number of years now, during what was an extremely difficult period for the economy and for the Reserve Bank as well. Mr Barnaba will continue to serve on the board until his term ends and I thank him for that as well. Wendy and Mark have been absolutely first class members of the Reserve Bank Board and I thank them for their contribution. Wendy finishes up at the next meeting, Mark in a couple of months’ time. And Iain and Elana will be very worthy, very important replacements for Wendy and for Mark.
I wanted to finish on this set of points about my gratitude for the way that the Reserve Bank, and particularly Governor Lowe, but also the Opposition and particularly the Shadow Treasurer, have engaged with this process over recent months. We have said from the beginning, that we want to see changes to the Reserve Bank made in a bipartisan way if we can. These are not ideological changes. These are considered proposals and recommendations that we have worked through in a really methodical way to try and get to the outcome that we have reached today, that we will support in principle all 51 recommendations. It's no small thing for the Reserve Bank Governor to engage in a process like this. It can be uncomfortable, and so I really did want to acknowledge and thank Phil Lowe for the way that he's engaged with me and the way that he has engaged with the Review over some time. And similarly, I did want to acknowledge Angus Taylor. Angus and I have our differences across a range of policy areas but he has engaged, I believe, in this process, in a considered way and in a cooperative way. I have arranged multiple briefings from the Review Panel over a period of some months. I provided the final report to him immediately after I briefed my Cabinet colleagues on the contents of the report and I have engaged with him, including this week, on the contents of the report and I appreciate the way that he has engaged with it. I want to work with the Parliament, including the Opposition, the stakeholders and regulators, the Reserve Bank and its board and the broader Australian community to bed down these recommendations. Because this is all about ensuring we have the right economic institutions and the right frameworks in place, to support a better future for all Australians. Over to you.
JOURNALIST:
[inaudible] Does this new collaborative approach put you back in charge of the bridge, the Treasurer of Australia, does that put you on the bridge in charge notwithstanding the new communal strategy?
CHALMERS:
The Governor of the Reserve Bank has a difficult job to do, and the Treasurer of Australia has a difficult job to do. And he does his job independently of me. And this report that we're releasing today, and the recommendations in the report are about bolstering the independence of the Reserve Bank not undermining that independence. It's no secret that Governor Lowe has had a difficult job to do, and the Reserve Bank Board has had to make a series of difficult decisions. And what I've tried to do as Treasurer, indeed before that as well, is not to pre‑empt or second guess decisions taken by the Reserve Bank Board. This Review that I'm releasing today is not about taking shots at anyone, it's not about one decision or one piece of advice or even one set of decisions. This is about making sure we've got the right combination of objectives and structures and processes and people to make the right decisions, difficult decisions into the future - and that's my focus.
JOURNALIST:
Treasurer, is Philip Lowe the person to implement the findings of this Review?
CHALMERS:
Governor Lowe's appointment is up in September and in the ordinary course of events, the government would turn its mind to that appointment closer to the middle of the year and that's my intention. My focus has been working with the Governor, with the Opposition and others and particularly with the Review Panel to finalise and now release the recommendations of the RBA Review. I have said for some time that the right sequence is to release this with the government's initial views and then to contemplate the Governor's appointment somewhere closer to the middle of the year and that's my intention.
JOURNALIST:
[INAUDIBLE].
CHALMERS:
I'm not going to pre‑empt the discussions and the consultation with my colleagues in the Cabinet, the Prime Minister in particular. We will turn our mind closer to the middle of the year on the role of Governor, the reappointment of Phil Lowe or otherwise. We've said for some time that that's our intention, I see no reason to change that. In the normal course of events, that appointment would be considered closer to the middle of the year and that's the timetable that we have in mind.
JOURNALIST:
Treasurer, does this Review say that the RBA in recent years hasn't really lived up to the expectations Australia has of it to do its job.
CHALMERS:
Well again, I'm not going to second guess or take shots at the Reserve Bank Board or its Governor for recent decisions. I cherish the independence of the Reserve Bank and I take my job seriously and I know that the Reserve Bank Governor and Board, they have a difficult job to do as well, they do that independently and they defend their decisions publicly, as it should be and they explain their decisions publicly, as it should be as well. There is some commentary and analysis about the making of monetary policy in recent years, I'll encourage people to check that out. But my job is very different - not to second guess decisions taken but to make sure we have the best combination of transparency and independence and expertise so that we have a world class Reserve Bank into the future.
JOURNALIST:
[INAUDIBLE].
CHALMERS:
First of all, I think it is entirely appropriate and I enthusiastically support the Reserve Bank's dual objectives outlined in this review. We want price stability and we want full employment and those are the two most important goals for the Reserve Bank and its Board. When it comes to making sure that there are a diverse range of views on the board. I think that there is a role for somebody who understands, is an expert in the labour market and particularly in wages, the relationship between all of the other issues that the Reserve Bank Board grapples with and considers and contemplates. I think the prospects for Australian workers should be front and centre in those considerations and in the appointment I'd made today of Iain Ross, there is probably nobody better placed in Australia to understand the performance of the macro economy in relation to the wages and living standards of ordinary working people and that's why I've appointed him.
JOURNALIST:
The report recommends that the six external members include somebody with industrial relations experience. Is your interpretation of that to give the unions a voice?
CHALMERS:
I certainly intend to make sure that the interests of workers are front and centre and that's why I've appointed Iain Ross today because nobody knows more, I think, about the interaction of the broader economic settings and the wages and living standards of Australian workers than someone like Iain Ross. I think that workers do deserve a voice around the Reserve Bank table and I think that Iain Ross's appointment today satisfies an important objective which is to make sure that the wages and living standards of ordinary working Australians are considered and contemplated as the Reserve Bank takes its decisions.
JOURNALIST:
The Review mentioned the word diversity 50 times and it highlights that there is a significant deficiency in the lack of diversity in senior leadership and the executive of the Reserve Bank and if you look at the website, you can see that quite clearly. You made two announcements today, are there no candidates from a more diverse background that you could push on the Board to more accurately reflect Australia's [INAUDIBLE]?
CHALMERS:
I share the Review's concerns about diversity at the Reserve Bank and more broadly, in our economic institutions. I think it is an issue, particularly when it comes to gender but there are all kinds of diversity that we need to factor in. What we've tried to do with these appointments today is to make the Reserve Bank Board more diverse, for example, by having a labour market expert around the table - that makes it more diverse. And Elana Rubin brings really a quite impressive array of experience to the Board as well. So there are all kinds of ways to boost diversity on the Board and our intention, whether it's in the Bank itself or on the board or in our broader economic institutions is to make them as diverse as we can.
JOURNALIST:
It was specifically speaking about cultural diversity, people from non‑English speaking backgrounds, people from [INAUDIBLE].
CHALMERS:
Obviously, those are important considerations and our task is to make our economic institutions as diverse as they can be and there are all different kinds of diversity.
JOURNALIST:
[INAUDIBLE]
CHALMERS:
Certainly I think one of the themes that emerges from the Review is how do we make sure that the views of the Governor around the decision‑making table can be tested, can be held up to the light, can be tested, that there are a range of views and perspectives applied to that. And so that is one of our objectives. Certainly, the appointments we've made today are made in that light but a real theme of the review, I think, is that in order to get the best possible decisions, you need the best possible combination of expertise and as part of that, you need to have the ability for the Governor's preliminary view as he enters the decision making room, the ability for those views to be tested in a constructive and collaborative way.
JOURNALIST:
Of the recommendations, which of these will be prioritised and how soon are we expecting them to be implemented?
CHALMERS:
As I said, the government supports in principle all 51 recommendations in the Review but there's a combination of ways to implement those recommendations. Some are the preserve of the Statement on the Conduct of Monetary Policy, I will work with the Governor to finalise that ideally this year. Some are things that the Reserve Bank has to implement on their own and I welcome Governor Lowe saying that he intends to work through that and to implement those recommendations. Some of them involve the other regulators, the Council of Financial Regulators, and there are other changes as well that need to be dealt with in a legislative way. So what we would like to do is to have everything bedded down by the middle of next year, that gives us a bit of an opportunity to get it right, to consult and to get the implementation right but there's a heap of work to do from here and so we need to give ourselves the time to do that, to work with all of the interested parties, including the Parliament, including the Reserve Bank and other regulators to make sure we get it right.
JOURNALIST:
Treasurer, on the transition to two new boards, will existing board members make up those boards or will there be a complete spill and if that's the case, when will that be? And just a supplementary to that, is this the end of business people on the monetary policy board?
CHALMERS:
Well, in reverse order, no, it's not the end of people with business experience. Elana Rubin has been appointed today for 5 years and Elana brings substantial corporate experience to the board. And that's an indication I think that we need the right combination and there's no combination that doesn't include people with experience in corporate Australia so that will remain. In terms of the existing board members, my intention is to leave all of them in place for the duration of their term but they will go on to different boards ideally. There will be two boards, if we implement this and legislate it, there'll be two boards from the middle of next year. Those with remaining time on their appointments would be allocated to one or other of those boards, and would ideally serve out something which approximates the time that they have now. It's conceivable that we make it more regimented when people's appointments finish, but it's not our intention to spill all of the members of the Reserve Bank Board. We think there's actually an important role for some continuity on the boards. People who've got experience from making these and taking these decisions, and they're good people and so we don't intend to spill them. We intend for them to serve out some period of time on one or other of the boards.
JOURNALIST:
[inaudible]
CHALMERS:
First of all, in expressing my gratitude to Phil Lowe and to Angus Taylor, I don't want to pre‑empt the comments that they will make off their own bat later today. I think Governor Lowe will be up quite soon to respond to the recommendations, and I assume Angus Taylor will be as well or a representative of the [Opposition] and so they will speak for themselves and I don't want to pre‑empt that. They have both said publicly now - in Phil Lowe's statement and Angus Taylor on radio this morning - that they support the directions of the recommendations in the Review. When it comes to legislation, we will work that through. And ideally, we would legislate later this year or early the following, but ideally later this year. And we will work through all the legislative issues or the drafting issues to give life to and give effect to the recommendations in the Review today.
JOURNALIST:
Cost of living, Treasurer, is a huge issue, as we know for many Australians, for them just beyond the finer points of this restructure, what can you say by way of reassurance in terms of the government's greater flexibility to manage the interest rate situation and provide relief now that the Governor doesn't have that unilateral control of things going forward with that more collaborative approach?
CHALMERS:
The Reserve Bank will continue to take its decisions independently. If anything, the Reserve Bank will be more independent, not less, as a consequence of the recommendations in this Review. But one of the most important set of recommendations is about the interaction of monetary policy - interest rates - and fiscal policy, which is the Budget that I work on with Cabinet colleagues and others and will be handed down before long. And what we've said throughout is we want to make sure that our budget settings don't make the job of the independent Reserve Bank harder. And that's why our priority when it provides when it comes to providing cost‑of‑living relief, whether it's medicines, early childhood education, help with energy bills, is about taking some of the edge off these cost‑of‑living pressures without adding to the inflation problem in our economy. And so that's why my work as Treasurer is aligned with the Governor and the board's work, when it comes to interest rates and the Review, I think, make some enlightened, important points about how we make sure that that's the case.
JOURNALIST:
Is there a role for civil society organisations on either of the boards in your view? [INAUDIBLE]
CHALMERS:
We want to make sure that the board is as diverse as it can be, and clearly you need an element of representation, whether it's working people or others, but you also need to combine that with expertise and you need good governance skills. And one of the reasons why I support there being two boards rather than one is because the type of people that you want to help the Governor come to a concluded view on interest rates might not be exactly the same kind of people that you want to run the bank and all its other priorities, and there's a payment system board as well. And so we will try and make the board as representative as we can but we also need to make sure we load up on expertise. There is a limited number of positions. Even when there are two boards obviously the number is limited, and so you do the best you can to get the best combination that you can. I think we've made an important investment in that today with our two appointments but a lot of what the Review Panel are talking about when it comes to appointments into the future is making sure that that process is as robust as it can be.
JOURNALIST:
Just quickly on the Federal Budget, is the government considering a bank levy as part of the budget?
CHALMERS:
That's not something we've been considering.
JOURNALIST:
[INAUDIBLE] power to override those decisions by the RBA, even though that power is currently not being used or has not been used?
CHALMERS:
Well, first of all, to add to the answer on Mark's question, obviously, the bank levy was introduced by our predecessors, and we don't have any plans to change it. On your question about independence, one of the legislative priorities in the Review itself, the recommendations of the Review, is to unwind the government's ability to overturn decisions by the independent Reserve Bank, it hasn't been used before and I can't imagine a situation where I would contemplate using it and because one of the priorities here is a more independent Reserve Bank, we think we can overturn that part of the legislation.
JOURNALIST:
So no foxes in the hen house - you'd be keen to tell Mr Taylor that as well?
CHALMERS:
I'm not quite sure what you mean by that.
JOURNALIST:
Well, I mean, Phil Lowe's take on this might be that a more collaborative approach is going to confuse things, that ostensibly it seems to be consensus, but it's going to become a series of other bushfires and debates, and it could become political.
CHALMERS:
We don't want there to be any element whatsoever of politicisation when it comes to the Reserve Bank, and the changes recommended by the Review Panel are about making the Reserve Bank more independent, not less, but also where there are areas where that is unclear to clarify that. Where there's an opportunity to better understand the work that the Reserve Bank does independently, and the work that the government does, independent of the Reserve Bank, is to make sure that their decisions on monetary policy, and our decisions on fiscal policy are broadly aligned. And I think that's been our objective all along but to the extent that the Review Panel has been able to grapple with that, and express a view on that, I think it's a welcome one. I've just got two questions from the gallery in Canberra that I wanted to cover off: how achievable is the July one start date? We are confident that we've given ourselves enough time to bed down the recommendations of this Review but there's a legislative part of this, there's a Statement on the Conduct on Monetary Policy, and there's other work to do as well. There's a lot of work that we need to do to bed this down, we'll do that work, ideally, have it all sorted by 1 July 2024, and we'll do that in consultation and collaboration with the Parliament and with the Reserve Bank as well.
JOURNALIST:
[INAUDIBLE]
CHALMERS:
That will be determined at a later date, ideally before the end of the year, but subject to consultation with other parties in the Parliament, particularly the Opposition. And also this is largely the preserve of Tony Burke and others, our legislative timeframe will be determined but clearly we've given ourselves a bit over a year to bed all of this down and legislation is part of it so we'll give ourselves enough time. Similarly, another question from the gallery is about the legislative timeframe, what sort of legislation? Again, we will work closely with the Reserve Bank and with the Opposition and others to get the legislation right, and to and to introduce it in a timely fashion. The next question is about the Statement on the Conduct of Monetary Policy, would it be substantially larger and longer now that it's got more elements. We will now work closely with the Reserve Bank on the Statement on the Conduct of Monetary Policy. But I think people can anticipate given the substantial work that we've been given by the recommendations of the Review Panel that that will be a more intensive, more detailed process than usual. But I'll work together with the bank and others in a collaborative way to make sure that we land that with the intention of finalising that by the end of the year. Does it mean it would be updated more often? Well, that's a decision for future treasurers to make. Certainly what I've tried to do is make sure that we've got the timing right, so that the statement reflects the recommendations of the Review. And then lastly, will it need extra funding to carry out the changes? The Reserve Bank will absorb any costs in the usual way. They operate their budget, largely independent from us, and if there are changes which are proposed in the recommendations here, which the Reserve Bank is going to pick up and run with.
JOURNALIST:
The report basically enshrines full employment as a target for the Reserve Bank. What's your definition of full employment?
CHALMERS:
Thanks, Adam and Ross. This will be the last one. Obviously, the definition of full employment is contested and the fact that we've got an unemployment at three and a half per cent is a really quite a remarkable achievement in the context of all the pressures we've got coming at us from around the world. The Reserve Bank has said publicly in evidence to the Parliament that they consider full employment to be in the low fours. The assumption that the Treasury uses in the Budget papers is four and a quarter per cent. That seems like useful, workable definitions of full employment but if you ask 10 economists what full employment is you might get 10 different views about that. That's fine. It's a contested concept, but for our purposes, we use four and a quarter per cent and the Reserve Bank uses something similar. Thanks very much.