Chalmers considers overriding RBA to secure Greens support

The Treasurer said that while he would rather not have to “come to an accommodation with the Greens”, the Coalition is forcing his hand.

The Greens are willing to endorse the creation of a new interest rate setting board at the central bank, but only if the Treasurer exercises his authority immediately to bring down interest rates.

In a statement issued late on Tuesday, the party’s economic justice spokesperson, Senator Nick McKim, said: “According to Jim Chalmers himself, the Reserve Bank has smashed the economy. Dr Chalmers has the power to reduce interest rates, and he must act before more damage is done.

“Given the Coalition’s decision today, and Dr Chalmers’ comments, the Greens are ready to engage in good faith with the Treasurer.”

The Greens’ statement comes after the Coalition opposed the bill to implement the findings of an independent review into the Reserve Bank, which suggested the bank be divided into two boards – one for monetary policy and another for governance.

Shadow treasurer Angus Taylor said on Tuesday that the Coalition could not support the bill over fears that Labor will stack the new interest rate committee with its own figures to sway the bank’s decision making.

“I wrote to the Treasurer saying we would not be supporting the Reserve Bank legislation he has brought to the public. This is the Treasurer’s legislation, not ours. And from the start, we’ve made clear that we were concerned that this strategy from the government was a sack and stack strategy for the Reserve Bank board,” Taylor told a media conference in Canberra.

Taylor’s allegations follow Chalmers’ suggestion last week that the RBA’s high interest rates are “smashing the economy”. This statement was made just a day ahead of the release of the worrying GDP print in what the Coalition has described as an attempt by the Treasurer to deflect some of the blame away from the government.

After Chalmers indicated that Labor would seek to engage with the Greens, the Greens released a statement of their own, expressing their willingness to collaborate with the Treasurer – but only if their conditions are met.

Among their demands is the preservation of the government’s authority to override RBA decisions, as well as maintaining the provision in the RBA Act that allows the RBA to channel funds into productive areas of the economy, such as clean energy.

“Removing democratic oversight over the RBA would be Labor’s final capitulation to the power of capital, and to the neoliberal agenda,” McKim said.

“Section 11 gives the Treasurer the ability to intervene to override the Reserve Bank when necessary. Dr Chalmers should use that power now to reduce interest rates and retain it so it can be used in the future.

“Section 36 allows the RBA to direct funds to productive areas of the economy like clean energy, rather than just the continued pumping of money into housing speculation.”

Chalmers had offered to make several amendments to the initial RBA legislation last month. Among the amendments was the retention of the federal government’s power to override the RBA on interest rates but with new limits. This followed criticism of the original proposal in the review to repeal the government’s override power – a move opposed by former RBA governors and Coalition members.

Responding to the Greens’ offer on Tuesday night’s 7:30, Chalmers said: “I’d rather not have to do a deal with the Greens”.

“If I can avoid it, I would. But I’m committed to these reforms. These reforms are really important. They’re really considered. They’ve been in the public domain for the best part of a couple of years now. They’ve been the subject of welcome discussion and debate, and it’s time to make this legislative change,” he said.

“I’d rather not have to come to an accommodation with the Greens. I’ve made that clear publicly and privately to them, to the Coalition, and I’ve made it publicly very, very clear. I’d rather not have to consider those sorts of things. Unfortunately, the Coalition may be forcing our hand,” the Treasurer added.