The Albanese government has revealed a proposal to split the board of the Reserve Bank of Australia (RBA) into two separate boards.

The government says breaking up the RBA would increase technical expertise and improve the central bank's functions. 

It is just one of 51 recommendations stemming from the review of the RBA, a report that constitutes one of the biggest shifts since the bank's separation from the government in 1983. 

The recommendation proposes separating the setting of monetary policy and institutional governance functions of the central bank into two distinct boards. The government should form a Monetary Policy Board with greater economic expertise and participation in decision-making while maintaining diverse perspectives and knowledge. 

The review suggests the government should legislate changes to commence from July 1 next year.

“The Reserve Bank board’s composition and decision-making processes have not sufficiently enabled it to shape policy decisions, strategy and the RBA’s underlying analysis and judgements,” the review states.

The RBA welcomed the recommendations and stated that it would work constructively to ensure that the recommended changes to the Reserve Bank Act strengthen the bank and the way it operates. 

The RBA review team included Carolyn Wilkins, who spent 20 years at the Bank of Canada, Professor Renee Fry-McKibbin from the Australian National University and Gordon de Brouwer, the current secretary for public service reform and former Treasury staffer.

Former treasurer Josh Frydenberg had initially flagged the review of the RBA, but current treasurer Jim Chalmers set it in motion. 

Chalmers also announced this week that former Fair Work Commission president Iain Ross and experienced non-executive company director Elana Rubin would join the RBA board this year.

The RBA board and its governor, Philip Lowe, have been criticised heavily over the past year, in the wake of ten successive interest rate rises to control inflation, which have impacted household incomes as various parts of the economy and consumer sentiment oscillate.

The separation of the RBA board would make it more similar to existing central bank models in the UK and Canada, and the government and opposition have signalled that they will take on most, if not all, of the much-anticipated report. 

The RBA currently employs around 1,400 staff, and the separation of its functions could potentially increase headcount if the Labor government decides to grow the RBA's operational functions to become a government fintech in-sourcer, a role it already plays to a degree by distributing pension and welfare payments and sitting consolidated revenue. 

Reports say there is a desire from the government and other parts of the financial services industry for the RBA, Treasury and the Australian Bureau of Statistics to receive economic data faster.