Treasurer Jim Chalmers has announced the most significant reforms to the Reserve Bank of Australia (RBA) since its inception in 1960, establishing separate boards for governance and monetary policy.

As part of this restructuring, David Thodey and Jennifer Westacott will join the new governance board, while Marnie Baker has been appointed to the interest rate-setting committee.

The interest rate committee will consist of existing RBA board members along with new appointees Baker and economist Renee Fry-McKibbin, who played a key role in recommending this new structure.

Fry-McKibbin, a respected monetary policy expert and professor at the Australian National University, was also involved in the recent RBA review.

Baker brings extensive financial experience to the committee, having served as CEO of Bendigo and Adelaide Bank and as deputy chair of the Australian Banking Association.

Elana Rubin and Carol Schwartz from the current board will transition to the governance board, with Schwartz taking on the role of deputy chair.

The governance board will also feature lawyer Danny Gilbert and Swati Dave, the former managing director of Export Finance Australia.

Governor Michele Bullock will continue in her role, supported by Andrew Hauser as deputy, while the new boards are set to commence on March 1, 2024.

Financial markets are anticipating a 60% chance of an interest rate cut during the RBA's upcoming meeting in February, and Watkins' term has been extended until February 28, 2024.

Chalmers emphasized that these appointments and structural changes are aimed at modernizing the RBA to effectively tackle current and future economic challenges.