(Bloomberg) -- Australian Treasurer Jim Chalmers’ plans to overhaul the Reserve Bank have suffered a major setback after the left-wing Greens party demanded the government order the central bank to cut interest rates.

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Greens economic spokesman Nick McKim said the minority party would withhold its support for the legislation until rates had been reduced, and that if the RBA’s board didn’t cut them on Tuesday, then Chalmers should use the government’s reserve powers to force it to do so.

The government’s power to overrule the central bank has never been used.

“The Reserve Bank board are not infallible high-priests of the economy who are above criticism,” McKim said in a statement on Monday. “Both the treasurer and the Reserve Bank governor have said they want this legislation passed. Now they know what they have to do to get it done.”

RBA Governor Michele Bullock has said rate cuts are unlikely this year as inflation is proving sticky.

Chalmers had originally wanted to negotiate with the center-right Liberal-National opposition to pass the legislation, which would split the RBA board into two separate bodies - one setting monetary policy and another overseeing the governance of the bank. The treasurer had wanted to steer clear of dealing with minor parties like the Greens to stave off more radical changes.

However, the opposition unexpectedly announced earlier this month that it would no longer be negotiating on the laws, forcing Chalmers to consider working with minor parties to pass the bills.

Speaking on Monday morning, Finance Minister Katy Gallagher said the government wouldn’t be agreeing to the Greens’ demand to overrule the RBA, effectively leaving the reforms dead in the water for now.

“It’s crazy what they’re saying to us,” Gallagher told the Australian Broadcasting Corp. “We won’t work with that because that is crazy, it’s economically irresponsible and we won’t do it.”

Gallagher said the government still remained committed to the RBA reforms, which were recommended by a review of the central bank released in 2023.

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