Treasurer Jim Chalmers' proposed reforms for the Reserve Bank of Australia (RBA) have ignited debate among Australia's financial policy elite.

Chalmers is facing pushback from former treasurers, RBA governors, and economists in response to his plan to remove the government's authority to overrule the RBA's decisions.

Former Treasurer Peter Costello, speaking at a Senate economics committee hearing, said; “It’s really a question for the parliament here”. 

“It’s a question of sovereignty – does the parliament think that it should still have powers in this area?”

Ian Macfarlane, former RBA Governor, has highlighted the nuanced balance between independence and oversight.

“We have to recognise that central bank independence is a good thing and no one has promoted it as much as I have. But it’s not God-given,” he said. 

He says he acknowledges that while independence is vital, a mechanism for governmental intervention in “once or twice a century” situations remains essential.

Bernie Fraser, another former RBA Governor, voiced concerns over the implications of removing Section 11 from the RBA Act, arguing that it “really risks the independence of the bank and its capacity to perform as we all want it to”. 

The reforms also propose the creation of a second ‘governance’ board - a move criticised by Fraser as potentially redundant and complicating. 

He suggested the idea could lead to a “committee of super nerds on monetary theory and monetary policy”, complicating rather than clarifying the decision-making process on interest rates.

Current RBA Governor Michele Bullock has described her position as “agnostic” on the power debate, contrasted with the fervent opposition from her predecessors.

Political opposition is mounting too, with Greens senator Nick McKim advocating for amendments to retain the government's reserve powers. This stance is echoed by figures including Paul Keating and the Coalition.