A review of the Reserve Bank of Australia (RBA) is set to start within days. 

The federal government this week announced a formal review of Australia’s central bank, which will cover the RBA’s objectives, mandate, the interaction between monetary, fiscal and macro-prudential policy, its governance, culture, and operations.

It comes after the institution was criticised for delaying interest rate rises even as inflation took hold, prompting its own governor to describe its forecasting as “embarrassing”. 

RBA governor Philip Lowe admitted in May that the central bank’s forecasting was “embarrassing”, as it had indicated that it would keep rates as low as possible until 2024, but instead issued guidance that helped to prolong a housing boom. 

“We should forecast this better. We didn’t,” he said.

The review will consider how the RBA reacts during times of crisis when monetary policy moves are limited.

Federal treasurer Jim Chalmers says he wants the RBA review to get underway before parliament sits on Tuesday 26 July, although details about the review panel and terms of reference are still being settled.

“I’ve got a little bit of consulting still to do, including with the Opposition, but I have come to a concluded view — almost — on the nature and timing and composition of that review process,” he said on Tuesday.

Mr Chalmers says the global economy is in a “difficult and dangerous place”. 

“There is a lot of concern around the world about the state of the global economy,” he said.

“The challenges are some combination of high and rising inflation, rising interest rates and the slowing growth that brings about food and energy insecurity, and also the issues around government’s choices being constrained by the debt that a lot of countries have added to over the course of the pandemic.”

The review is also expected to cover APRA's rules on how much banks can lend and to whom.