Today's release of a new Statement on the Conduct of Monetary Policy represents a new era of independence and transparency for the Reserve Bank.
The Statement outlines a mutual understanding on the conduct of monetary policy between the new Government, represented by the Treasurer, and the Governor as Chairman of the RBA Board.
The Statement delivers on the Rudd Government's election commitment to strengthen the independence of the Reserve Bank and will enhance the transparency of the conduct of monetary policy in Australia.
Strengthening the independence of the Reserve Bank is a critical element of the Government's commitment to putting downward pressure on inflation.
The new Statement does this through a number of reforms agreed between the Treasurer and the Governor.
To enhance the independence of the Reserve Bank, the positions of Governor and Deputy Governor will be raised to the same level of statutory independence as the Commissioner of Taxation and the Australian Statistician.
The appointments of Governor and Deputy Governor will be made by the Governor-General in Council and their terminations will require parliamentary approval. Currently the Governor and the Deputy Governor are appointed by the Treasurer and their appointment can be terminated by the Treasurer.
The Rudd Government is committed to improving the transparency of future Reserve Bank Board appointments and to remove political considerations.
Accordingly, the Secretary to the Treasury and the Governor of the Reserve Bank will maintain a register of eminent candidates of the highest integrity from which the Treasurer will make appointments to the Reserve Bank Board.
The new Statement also incorporates the transparency measures announced by the Governor yesterday including the publication of Board minutes, and a statement of reasons for the decision following each monthly meeting irrespective of whether there is an adjustment in the cash rate.
Today's announcement is an important step towards ensuring the appointment processes, debates and decision making of the RBA are as independent and transparent as possible.