Quick Take: Reviewing the New RBA Board Structure

Summary

• Having passed the federal government’s long-delayed amendments to the Reserve Bank Act back in November, Treasurer Chalmers has delivered the composition of the two new RBA boards.
• Two new members will join the Monetary Policy Board: Renée Fry-McKibbin and Marnie Baker. Four current board members will transition to the board.
• The new MPB will commence as of 1 March 2025. Decisions to publish votes or for members to publicly voice their own opinions first require a group decision.

Market Implications

• We remain short AUD/NZD (target: 1.06; stoploss: 1.13).

A New RBA Board Structure

Having passed the federal government’s long-delayed amendments to the Reserve Bank Act back in November, the Treasurer has finally shaken things up: the RBA’s Board is being split into two:

1. Monetary Policy Board (MPB)
2. Governance Board

Who is on the Monetary Policy Board?

The MPB will be the rate setters. Comprised of three internal (ex-officio) and six external members, they will determine the appropriate monetary policy actions. The internal members remain unchanged; Michelle Bullock remains the Governor, Andrew Hauser the Deputy Governor, and Steve Kennedy remains the Secretary to the Treasury (Table 1).

However, there are two new external members on the MPB: Renée Fry-McKibbin, a Distinguished Professor of Economics at the Australian National University’s Centre for Applied Macroeconomic Analysis; and Marnie Baker, considered an expert on Australia’s financial system. Meanwhile, Alison Watkins, Iain Harper, Carolyn Hewson, and Iain Ross will transfer to the MPB.

A Risk Votes Are Published and External Members Deliver Speeches

The MPB will commence as of 1 March 2025. That means there is one more meeting with the current set up (Feb ’25) before their first meeting (Apr ’25).

We may see unattributed votes released (in line with most central banks) and external members allowed to publicly speak their own independent voice. Neither of these are guaranteed, and we may see other updates. Before these decisions are made, Bullock has already told us the entire MPB would have to discuss.

What Does It Mean for Monetary Policy?

Aside from the fact that we have two new members and an additional board, the market has taken the news in its stride. Partly because the additions are seen as experts without forecasting experience (i.e., they are unlikely to be able to challenge RBA forecasts). And partly because it is only two new names in a board of nine! A first cut is priced for April (near enough).

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)