RBA Reforms: A New Era for Australia's Monetary Policy

Australia's Reserve Bank is undergoing significant reforms, creating a separate monetary policy committee, stirring uncertainty about future rate cuts. Despite challenges from the opposition, the reforms passed with support from the Greens. Analysts foresee changes in interest rate decisions with potential new committee members.

Australia's central bank is set to receive a major overhaul in its policy-making process, adding uncertainty to the timeline for potential interest rate relief for struggling borrowers.

The Reserve Bank of Australia (RBA) is implementing long-awaited reforms passed in parliament with the support of the ruling Labor government and Greens, bypassing opposition from the main Liberal National coalition. An independent review in 2023 recommended these changes, including splitting the RBA board into groups focused on monetary policy and governance.

While the current board maintains rates at 4.35% and sees little chance of near-term easing, the new committee structure might influence future interest rate outlooks. Goldman Sachs economist Andrew Boak suggests these changes bring unpredictability to the RBA's decisions. Treasurer Jim Chalmers is set to introduce the new format by March 1, after consultations with the opposition.

(With inputs from agencies.)