Lowe sees ‘strong case’ for RBA board members to stay

Philip Lowe says there is a “strong case” for existing Reserve Bank of Australia board members to remain as interest rate setters to steer inflation back to target, jarring with Treasurer Jim Chalmers’ push for new appointees.

The former governor’s public intervention came as people familiar with the situation privately said there were at least two current board members who were willing to transfer from monetary policymaking to a new RBA governance board under the planned dual-board shake-up.

In Canberra, a political standoff between Dr Chalmers and shadow treasurer Angus Taylor over the identities of future board members is threatening to block legislation required to overhaul the RBA following an independent review.

Mr Taylor has demanded all nine board members, including six business outsiders, carry over to the new monetary policy board due to start in July to prevent the treasurer appointing political cronies at a time of above-target inflation.

Asked about the impasse on Thursday, Dr Lowe said if the legislation was passed, “I can see the merits in both arguments that the existing board members were appointed for five years to set interest rates”.

“There’s a strong case to allow them to carry out that mandate,” he said in response to a question from The Australian Financial Review at a conference in Sydney.

“Otherwise, you’re kind of changing the composition of people who set interest rates mid-course. And we’re in a difficult, delicate period over the next little while.

“So, I think there are benefits from continuity.

“The government obviously wants to replace some of the existing people with other people, but that could work as well, as long as the people are good. But I really see a benefit in continuity at the moment.”

RBA governor Michele Bullock last month said she would like “continuity with respect to both boards”, meaning she would like some of the current RBA board members to move to the governance board, allowing Dr Chalmers to add fresh faces to the interest rate-setting board.

Treasury has advertised for new candidates to apply for both boards, and headhunter Korn Ferry is also helping identify contenders.

Dr Chalmers has sent a letter to the six RBA part-timers asking them if they would prefer to serve on the monetary policy board or the new governance board that will oversee the bank’s human resources, technology, finances and building reconstruction.

Several people close to the government and RBA privately said at least two people had indicated a willingness to transfer to the governance board, to assist Dr Chalmers and governor Ms Bullock to reform the bank.

However, it is understood most board members had expressed a preference to remain as monetary policymakers.

The six part-time outsiders are economist Ian Harper, financial services veteran Carolyn Hewson, former Fair Work Commission president Iain Ross, company director Elana Rubin, businesswoman Carol Schwartz, and company executive-turned director Alison Watkins.

Dr Chalmers appointed former unionist Dr Ross and Ms Rubin last year, raising concerns among the Coalition that further appointees could be Labor sympathisers and come at the expense of the four remaining Coalition appointees.

At the time of their appointments, sources said Dr Ross was likely to remain as a monetary policymaker due to his knowledge on wage setting.

Ms Rubin was tentatively slated for the future RBA governance board given her extensive director experience at Telstra, Victorian Funds Management Corporation, Afterpay, ME Bank, Mirvac, MLC and AustralianSuper.

At least one other board member with extensive corporate board experience is understood to be prepared to jump to the governance board for the stability of the institution and to assist Ms Bullock in the transition, people familiar with the situation said.

The RBA review last year found the board members as a collective lacked the capacity to sufficiently scrutinise or challenge the central bank governor on interest rate decisions. The RBA board has not voted against a single recommendation of the RBA executive in at least the past decade.

Dr Lowe’s comments came after Liberal MP Garth Hamilton broke ranks and said Mr Taylor should drop his objection to new RBA board appointments.

“I don’t think it’s unreasonable for the government to make a single change to the RBA board in light of the magnitude of the reforms,” Mr Hamilton said on Wednesday.

The remarks are a sign of the disquiet in the Coalition about the overhaul of the central bank. Some MPs are not convinced of the need to restructure the RBA, and the legislation is stalled in the Senate.

Dr Chalmers replaced Dr Lowe after his seven-year term ended last year, anointing Ms Bullock as his successor. She was originally appointed deputy governor by former Liberal treasurer Josh Frydenberg.

Former Bank of England official Andrew Hauser was appointed deputy governor by Dr Chalmers, a bipartisan move supported by Mr Taylor.

Ms Bullock and Mr Hauser will serve on both boards, while Treasury secretary Steven Kennedy will remain as an interest rate setter.