Reserve Bank deputy governor Philip Lowe is seen as the most likely to take over from governor Glenn Stevens in three years.
Economists said the decision to extend Mr Stevens' term by just three years was a sign the bank had set in train a succession plan.
Dr Lowe, who has been with the RBA for more than three decades, was appointed deputy governor in February last year.
But Dr Lowe probably needed "more time" in the role before being promoted to governor, ANZ economist Katie Dean said.
The three-year extension to Mr Stevens' tenure mirrors that of his predecessor, Ian Macfarlane.
"The most savvy market players have been listening intently to Dr Lowe's speeches over the past year," TD Securities' head of research, Annette Beacher, said.
"Dr Lowe particularly favours higher productivity as a long-term solution for lower inflation."
Saul Eslake, the chief economist of Bank of America Merrill Lynch in Australia, said Dr Lowe was the clear front-runner.
"For [assistant governor] Guy Debelle to get it, who I guess would be the most obvious other internal candidate, would sort of be tantamount to an admission that they got it wrong in appointing Phil as deputy," he said.