Australia’s central bank gets banker, economist to rate-setting board

By Stella Qiu

SYDNEY (Reuters) – Australian Treasurer Jim Chalmers on Monday announced two new members to the central bank’s rate-setting board, with the majority of board members staying in a bid to ensure policy continuity.

Long-delayed reforms to the Reserve Bank of Australia (RBA) passed parliament last month, which will allow the government to split the RBA board in two, with one group dedicated to monetary policy and the other focusing on operations.

Marnie Baker, former CEO at Bendigo and Adelaide Bank, and Renee Fry-McKibbin, an economics professor who was on the RBA review panel, will join the monetary policy committee (MPC), replacing Carol Schwartz and Elana Rubin, who will move to the new governance board, Chalmers said.

He also appointed four members to the governance board – Jennifer Westacott, David Thodey, Danny Gilbert and Swati Dave.

“These appointments will ensure continuity on both boards,” Chalmers said at a press conference.

“The governor of the Reserve Bank wanted there to be continuity on both boards, so did I, rather than just one board.”

The MPC consists of six external members appointed by the treasurer and three ‘ex officio’ members comprising the RBA governor, deputy governor and treasury secretary.

The reforms also recommended the new MPC members to formally vote at board meetings and the overall vote will be published, and members might choose to give public speeches.

Chalmers said the new policy board will discuss these matters when it meets in March.

Andrew Boak, chief economist at Goldman Sachs, said given there could have been up to six new appointees to the policy board, the two changes supported a high degree of continuity in the RBA’s reaction function.

“In our view, this reduces the odds that the current Board defers the decision to cut rates until the new Board structure starts in March,” said Boak, adding that he still expects the RBA to cut rates in February.

There had been some concerns that a completely new monetary policy board could change the outlook for interest rates. Swaps imply there is a split chance that the RBA can cut in February after policymakers unexpectedly turned dovish last week.

A first easing is almost fully priced in by April.

The current board has held policy steady for over a year now, judging the current cash rate of 4.35% – up from 0.1% during the pandemic – is restrictive enough to bring inflation to its target band of 2%-3% while preserving employment gains.

Headline consumer price inflation slowed to 2.8% in the September quarter but it was mainly due to temporary government rebates on electricity bills, and core inflation remained stubborn at 3.5%.