Live: Philip Lowe will seek another term as RBA boss despite critical review; ASX fairly flat

Regarding my earlier post about the RBA review’s recommendation to repeal a large slab of section 11 from the Reserve Bank Act 1959.

Here’s the relevant section.

It’s the section that gives the government ultimate responsibility to overrule an RBA action as an emergency resort.

You can see how the mechanism has been designed to work, even though it’s never been used.

The RBA review has recommended removing subsections 2 to 7.

RESERVE BANK ACT 1959 – SECT 11

Differences of opinion with Government on questions of policy

             (1)  The Government is to be informed of the Bank’s policy as follows:

                     (a) the Reserve Bank Board is to inform the Government, from time to time, of the Bank’s monetary and banking policy;

                     (b)  the Payments System Board is to inform the Government, from time to time, of the Bank’s payments system policy.

             (2)  In the event of a difference of opinion between the Government and one of the Boards (the relevant Board ) about whether a policy determined by the relevant Board is directed to the greatest advantage of the people of Australia, the Treasurer and the relevant Board shall endeavour to reach agreement.

             (3)  If the Treasurer and the relevant Board are unable to reach agreement, the relevant Board shall forthwith furnish to the Treasurer a statement in relation to the matter in respect of which the difference of opinion has arisen.

             (4)  The Treasurer may then submit a recommendation to the Governor-General, and the Governor-General, acting with the advice of the Federal Executive Council, may, by order, determine the policy to be adopted by the Bank.

             (5)  The Treasurer shall inform the relevant Board of the policy so determined and shall, at the same time, inform the relevant Board that the Government accepts responsibility for the adoption by the Bank of that policy and will take such action (if any) within its powers as the Government considers to be necessary by reason of the adoption of that policy.

             (6)  The relevant Board shall thereupon ensure that effect is given to the policy determined by the order and shall, if the order so requires, continue to ensure that effect is given to that policy while the order remains in operation.

             (7)  The Treasurer shall cause to be laid before each House of the Parliament, within 15 sitting days of that House after the Treasurer has informed the relevant Board of the policy determined under subsection (4):

                     (a)  a copy of the order determining the policy;

                     (b)  a statement by the Government in relation to the matter in respect of which the difference of opinion arose; and

                     (c)  a copy of the statement furnished to the Treasurer by the relevant Board under subsection (3).