Rates veto power must stay: Greens issue RBA demands

Fizzling Reserve Bank reforms could be revived if the federal government is prepared to keep its veto power of interest rate decisions and meet other demands from the Greens.

The minor party also wants the RBA to maintain its ability to direct lending activity for banks in the hope funds could be funnelled into clean energy down the line.

Treasurer Jim Chalmers said the opposition had dealt in the Greens and the Senate crossbench by rejecting his sweetened deal.

The reforms stem from an independent review of the central bank intended to strengthen and modernise the key economic institution.

Top of that list was a dual board set-up, one for setting interest rates and another for governance.

Despite Dr Chalmer's efforts to allay opposition fears of Labor-aligned appointments by promising existing board members would go on to the interest rate board - unless they chose not to - the coalition was unsatisfied.

Shadow Treasurer Angus Taylor said the door was still ajar for a "sack and stack strategy" and the treasurer had failed to meet his demands.

Asked if he would change his mind if all board members went onto the interest rate board with no exceptions, Mr Taylor said it was time to let the RBA get on with its job.

Dr Chalmers slammed the position, arguing he had negotiated with the opposition in good faith and "put a premium on bipartisanship".

"The Reserve Bank reforms are all about making the RBA more independent, not less independent, and the position that the coalition has taken shows that it has absolutely no idea and absolutely no economic credibility," he said on Tuesday.

Potential appointees had been run by the shadow treasurer and Dr Chalmers said Mr Taylor was not genuinely worried about the board make up but rather "playing politics".

Concessions had already been made on another controversial change to scrap the veto rule to override interest rate decisions, a move opposed by the Greens.

Under the revisions put to the opposition in a letter last month, the parliament would maintain the override power but it would have new caveats limiting it to emergency circumstances only.

Greens economic justice spokesperson Nick McKim called on the government to not only keep the power but to act on it.

"Dr Chalmers has the power to reduce interest rates, and he must act before more damage is done," he said.

Senator McKim also wanted the RBA to maintain the ability to direct bank funds, a rule the reviewers wanted scrapped.

"Section 36 allows the RBA to direct funds to productive areas of the economy like clean energy, rather than just the continued pumping of money into housing speculation," he said.