Treasurer Announces New Reserve Bank Appointments

By Stella Qiu

SYDNEY (Reuters) – On Monday, Australian Treasurer Jim Chalmers announced the appointment of two new members to the Reserve Bank of Australia's (RBA) rate-setting board, while ensuring that the majority of existing members remain to maintain policy continuity.

Last month, reforms allowing the government to split the RBA board into two distinct groups—one for monetary policy and the other for operations—were passed by parliament.

New Members
Marnie Baker, former CEO of Bendigo and Adelaide Bank, and Renee Fry-McKibbin, an economics professor who participated in the RBA review panel, will join the Monetary Policy Committee (MPC). They replace Carol Schwartz and Elana Rubin, who will transition to the new governance board.

Chalmers also appointed four new members to the governance board: Jennifer Westacott, David Thodey, Danny Gilbert, and Swati Dave. “These appointments will ensure continuity on both boards,” he stated at a press conference.

The MPC will comprise six external members appointed by the treasurer alongside three 'ex officio' members from the RBA: the governor, deputy governor, and treasury secretary. The reforms empower the new MPC members to vote at board meetings, with the overall vote results to be published. Members may also opt to make public speeches.

Chalmers noted that the new policy board will address these topics at its meeting in March.

Market Implications
Andrew Boak, chief economist at Goldman Sachs, remarked that with the possibility of up to six new appointments, the changes reflect a high degree of continuity in the RBA's approach. He suggested this reduces the likelihood of the current board postponing a rate cut decision until the new board structure is operational in March, although he still anticipates a rate cut in February.

Concerns existed regarding a complete overhaul of the monetary policy board potentially altering interest rate forecasts. Current market swaps indicate a split probability for a rate cut in February following last week's dovish signals from policymakers. A first easing is almost fully expected by April.

Currently, the board has maintained the policy stance for over a year, with a cash rate of 4.35%, an increase from 0.1% during the pandemic, deemed sufficient to meet inflation targets of 2%-3% without compromising employment gains. While headline consumer price inflation decreased to 2.8% in the September quarter, this was primarily a result of temporary government electricity bill rebates, with core inflation resilient at 3.5%.