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Monday, 26 May 2008
Page: 3051


Mr CRAIG THOMSON (12:01 PM) —Today I commend a bill to the House that strives to strike the balance between independence and accountability in the Reserve Bank of Australia. The purpose of the Reserve Bank Amendment (Enhanced Independence) Bill 2008 is to amend the Reserve Bank Act 1959 to allow the Governor-General on the advice of the federal Executive Council instead of the Treasurer to appoint, suspend and terminate the Governor and Deputy Governor of the Reserve Bank. This will ensure that the potential for political interference with the independence of the Reserve Bank can be put to an end. We have seen in recent years attacks on the concept of Reserve Bank independence by the previous government. As the Treasurer recently noted in the Australian Financial Review on 10 April 2008, either you believe in the independence of the Reserve Bank or you do not. Judging by their recent behaviour, coalition members find it hard to say that they are classed as 100 per cent believers in this very act they are opposing. Like in all the great issues of our time, the coalition does not seem to have a consistent and coherent viewpoint on the role of the Reserve Bank—just like Work Choices, which is either dead or alive and kicking depending on which member of the coalition you are talking to and upon which day of the week it happens to be; just like climate change and the signing of the Kyoto protocol, which is either a left-wing conspiracy or a serious challenge depending again on what day of the week it is and on which particular member of the opposition you happen to be talking to; and just like foreign policy where the Prime Minister is told that he is going too soft on China over human rights in Tibet and then a couple of days later is shamelessly told that he has gone too far.

Unfortunately, the coalition’s brazen inconsistencies and carping opposition is not contained to industrial relations, climate change, foreign policy, Indigenous issues, inflation, whaling, means testing, binge drinking, the 2020 Summit, the budget and the rate of government spending; it also relates to the Reserve Bank. We all remember the 2004 election when the Liberal Party ran ads suggesting that it was not an independent Reserve Bank that formulated and implemented monetary policy but in fact the Liberal Party. Section 10(2) of the Reserve Bank Act 1959, which is often referred to as the bank’s charter, says:

It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:

(a)   the stability of the currency of Australia;

(b)   the maintenance of full employment in Australia; and

(c)   the economic prosperity and welfare of the people of Australia.

It does not mention anything about the Liberal Party having a function in keeping interest rates at record lows, though that is what they tried to have us believe at the 2004 election. I remember last year when John Howard was being criticised after the sixth interest rate rise since the ‘at record lows’ ads of 2004. He sounded incredibly mean and tricky when he was challenging his detractors to check the transcripts and show where he had said that he was keeping interest rates as record lows. I know that at that time there were many people in my electorate that felt betrayed by Mr Howard. Many of those people had been voting for John Howard since 1996.

You would have thought that the Liberal Party would have learnt the lesson from the dive in public confidence that pushed the former government out of office, but apparently not. Brendan Nelson, in the latest issue of the New South Wales Liberal women’s council magazine, is again bragging about low interest rates. After 12 consecutive rate rises the Leader of the Opposition has nothing to brag about. At a time when we desperately needed to build infrastructure, educate and skill our population and cut wasteful spending to take the pressure off inflation, the then Liberal government was twiddling its thumbs or ignoring the elephant in the room. I know that the Leader of the Opposition has a tough time working out what he believes, and it appears that the shadow Treasurer is in much the same boat. He should definitely cut the belief that the former government was a responsible economic manager at the end of its term. The then government gave us a 16-year high inflation rate that is largely to blame for the latest interest rate rises, and it received 20 warnings from the Reserve Bank, yet no action was taken by the former government.

As soon as the Rudd government was elected we got on with the job of responsible economic management. On 6 December 2007 the government released a statement on the conduct of monetary policy. The statement set out the common understanding of the governor, as chairman of the Reserve Bank, and the government on key aspects of Australia’s monetary policy framework. In both the statement and the accompanying joint media release of the Prime Minister, Kevin Rudd, and the Treasurer, Wayne Swan, the government announced that it would make a number of changes to enhance the independence of the Reserve Bank of Australia and the transparency of certain of its operations. The release outlined that the following elements would be implemented: the positions of governor and deputy governor would be raised to the same level of statutory independence as the Commissioner of Taxation and the Australian Statistician; the appointments of both positions would be made by the Governor-General in Council and their terminations would require parliamentary approval; the Secretary to the Treasury and the Governor of the RBA would maintain a register of eminent candidates of the highest integrity from which the Treasurer would make appointments to the board; and the new statement on the conduct of monetary policy would include measures such as the publication of board minutes and the statement of reasons for the decisions of the boards.

At that time there was no outcry from the opposition saying that these were not good measures. There was no-one coming forward saying that these were not things that should take place to make sure that we have more transparency in relation to the Reserve Bank. Yet we find ourselves today with the sorry position of the opposition opposing this bill, which goes to those points that specifically look at enacting what the Prime Minister and the Treasurer outlined back in December of last year.

When the Reserve Bank was first established in 1959, the Governor-General had the function of appointing and terminating the positions of the Governor and the Deputy Governor of the Reserve Bank of Australia. In the Financial Sector Legislation Amendment Act (No. 1) 2003, the state of affairs was changed to give the functions to the Treasurer. Under those amendments the Treasurer was given the function of: appointing the members of the RBA board under section 14 of the act; terminating board members under section 18 of the act; appointing and terminating the governor and the deputy governor; and appointing and terminating members of the Payments System Board.

Items 1 and 2 amend sections 24 and 24B of the act to delete reference to the Treasurer and substitute it with the Governor-General. Section 24 currently provides that the governor and the deputy governor are to be appointed by the Treasurer for a period of seven years, but are eligible for reappointment. Paragraph 24(1)(c) provides that the governor and the deputy governor hold office subject to good behaviour. Members of the Reserve Bank board also hold office subject to good behaviour. Section 24B is the resignation provision.

Item 3 repeals section 25 and substitutes new section 25 to provide for the termination of the appointments of the governor and the deputy governor. Existing section 25 provides:

If the Governor or the Deputy Governor:

(a)   becomes permanently incapable of performing his or her duties; or

(b)   engages in any paid employment outside the duties of his or her office; or

(c)   becomes bankrupt, applies to take the benefit of any law for the relief of bankrupt or insolvent debtors, compounds with his or her creditors or makes an assignment of his or her salary for their benefit;

the Treasurer shall terminate his appointment.

These grounds for termination are replicated in new subsection 25(8) and therefore are the only grounds for the termination of these positions. Under the existing arrangements, paragraph 24(1)(c) may give the Treasurer the discretion to terminate the governor on lack of good behaviour grounds, whereas section 25 requires the Treasurer to terminate if one or more of the stated grounds are met. There is currently no limitation in section 25 as there is in this bill, and the TAA, that there shall be no termination except as provided by this section.

New subsection 25(1) provides that the Governor-General can terminate the appointments if each house of parliament presents to the Governor-General an address praying for the termination of the appointments on a ground specified in new subsection 25(8). Suspension prior to such termination is not necessary under this subsection. The Governor-General can suspend the governor or deputy governor from office on a ground specified in subsection 25(8) and the minister, the Treasurer or the Minister representing the Treasurer has to table a statement concerning the suspension in both houses of parliament within seven sitting days. Within 15 sitting days of the statement, the houses can then declare by resolution that the appointment should be terminated—this is the new subsection 25(4). Under subsection 25(6), if both houses do not pass such a resolution, the suspension ceases and the position holder will continue in office. Under new subsection 25(5), in the event the resolution is passed by each house, the Governor-General must terminate the appointment.

New subsection 25(9) provides that the governor or the deputy governor can only be terminated on a specific ground by the means specified by new section 25. This limits termination to the grounds specified and in the manner specified by this section. As noted earlier, the governor and deputy governor hold office subject to good behaviour, which is an ongoing requirement and a prerequisite for holding office. The Reserve Bank Act is the only Commonwealth act which has this particular expression. Under the changes proposed by the bill, in the event that the position holder is not of good behaviour there is no mechanism for termination as this requirement is not specified as a ground under the new subsection 25(8). If a governor or deputy governor did not offer a resignation to the Governor-General under the amended section 24B there is no power to remove the governor or the deputy governor. This can be contrasted to the present position in that, although the grounds of removal from office are the same, there is no strict limitation on the Treasurer’s current power to terminate an appointment, as will be the case under the proposed amendments.

It is not only monetary policy that requires openness and transparency in the fight against the Liberal Party’s parting gift of high inflation. Fiscal policy is also very important in this fight.

At this stage I would like to put on the record my congratulations to the Treasurer, Wayne Swan, for putting together a terrific budget. In time I believe this budget will be seen as a turning point in which government shifted from short-term spending to long-term investment. After 12 years of the Howard government, who did not adequately invest in health, education, infrastructure and skills, and instead siphoned money into electoral bribes, it was very heartening to watch an Australian Treasurer put forward a fiscally responsible, nation-building budget.

The Treasurer gave the budget that we need in Australia right now. He gave the budget what my electorate of Dobell needs right now. With the lowest median household income in New South Wales, Dobell does not need cheaper luxury European cars or a baby bonus for millionaires. We need the infrastructure and the services that will give opportunity to all those who live there. It is amazing that the opposition thinks that a tax on alcopops is the major issue facing working families across this country. I invite the opposition to come to Dobell on a Friday or Saturday night and see the effects of cheap alcopops on many of the young people in my electorate.

I believe that this budget has delivered to the working families of the Central Coast a strong and effective way forward. It is a step in the right direction to enhance our prospects of becoming an economically self-sufficient region in our own right. As the Treasurer said:

The Government has made sure every single cent of new spending for the coming year has been more than met by savings elsewhere in the Budget.

Our commitments have been honoured by redirecting spending. Difficult spending cuts have helped fund our Working Families Support Package and our new priorities for the nation.

We are budgeting for a surplus of $21.7 billion in 2008-09, 1.8 per cent of GDP, the largest budget surplus as a share of GDP in nearly a decade.

This honours and exceeds the 1.5 per cent target we set in January, without relying on revenue windfalls.

It is a surplus built on substantial savings of $33 billion over four years, including $7 billion in 2008-09 alone.

And it is a surplus built on disciplined spending, with the lowest real increase in Government spending in nearly a decade; spending growth which is one quarter of the average of the previous four years.

We need a strong surplus to anchor a strong economy; to do our bit to ease inflationary pressures in the economy; to build a buffer against international turbulence; and so we can fund ongoing long term investment in the ports, roads, railways, hospitals, universities and vocational education we need, to deliver growth with low inflation into the future.

Enhancing the independence of the Reserve Bank is a part of the broader ideology of Kevin Rudd, Wayne Swan and the Labor government to deliver strong, decisive and unashamedly fiscally conservative policy to ensure a modern and competitive economy.

This proposed bill shows the commitment of the government to a more independent Reserve Bank in line with modern practice and it is worthy of our support. It shows a new and forward-thinking government that is willing to make difficult decisions in fiscal and monetary policy in order to ensure that Australia is the best country it can be in economic terms. The new government has had a lifespan short of only 200 days so far, yet even in this short period of time the foundations are being laid for an Australia that working families deserve. The building blocks are there for a fairer, more inclusive and more prosperous nation that we can all be proud of. This bill is part of that. It will increase the transparency of the Reserve Bank and ensure that all Australians have confidence in the Reserve Bank in its role in setting monetary and fiscal policies and ensuring that inflation is kept in control. I commend this bill to the house.