The Australian government has implemented significant reforms to modernize and strengthen the structure of the Reserve Bank, the most significant changes since its establishment.

In a series of changes drafted after an independent review and extensive consultation, separate boards will be set up for governance and monetary policy decisions. The changes are likely to be implemented after the RBA's February meeting. The government said it would appoint "first-class, first-rate people" to both boards through a consultative process.

The Key points:

• The Reserve Bank reforms will begin three months after royal assent, which is likely to be after the February RBA meeting

• There will be two new boards: a Governance Board and a Monetary Policy Board

• Bipartisan consultation on board appointments is pledged by the government, after the opposition earlier refused to agree to this

• The timeline for implementation was pushed back from the initial target of July 2023 amid continuing parliamentary negotiations.

"We have done a lot of work, an independent review, a lot of consultation, to make sure that we can modernise and strengthen the Reserve Bank so that it plays the most effective role that it can in the future of our economy." - Jim Chalmers, Treasurer

"Our strong preference was for these reforms to be bipartisan because we believe that the independent Reserve Bank should be above party politics." - Jim Chalmers, Treasurer

Big picture: These reforms represent an important turning point in the history of Australia's economic governance. By reforming the RBA structure, the government is seeking to make this institution better equipped to confront any future economic challenges. For this reason, these reforms will have long-lasting consequences for monetary policy conduct and central bank responses to cycles in Australia.

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