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Monday, 23 June 2008
Page: 3003

Senator HURLEY (1:38 PM) —The Reserve Bank of Australia is a very important part of our financial institutions. Its independence is valued and has been valued by all political parties in Australia and, I believe, by the other financial institutions in Australia. There is increasing independence and autonomy rested in the Reserve Bank of Australia. This leads to a great deal of stability and confidence in the financial markets in Australia and it is something that, quite rightly, all sides of politics have supported in our quest for greater transparency in our financial systems.

This of course does not mean that there has not been a bit of political grandstanding from time to time by those political parties concerned. I think that political grandstanding could have been responsible for Paul Keating’s famous statement about the Reserve Bank being in his pocket—a statement that has been repeated very many times and which has been described, I think quite rightly, as demonstrably untrue. The Reserve Bank was not in Paul Keating’s pocket, and I think it was a little political grandstanding on his part. But I think it was also a bit of political grandstanding by the Howard-Costello government when they came in claiming responsibility for the independence of the Reserve Bank on the back of that statement. I think that is demonstrably untrue as well and was very much political grandstanding. The Reserve Bank of Australia has been slowly gaining in independence and autonomy over many years. Indeed, the Reserve Bank Amendment (Enhanced Independence) Bill 2008 continues that process and follows on from a continual trend of giving the Reserve Bank, and necessarily the Governor of the Reserve Bank, far more independence.

Much has been made by the shadow minister and other members of the Liberal Party about the new involvement under this bill of the parliament in the process of appointing and dismissing the Reserve Bank governor and deputy governor. I think it is a step towards greater independence, and the public perception of greater independence, for the Reserve Bank governor and deputy governor to be included in a process whereby the Governor-General makes the appointment and, indeed, the dismissal. During the hearings of the Senate committee on this matter, much was made of the perceived difficulties in dismissal and what would happen if the Reserve Bank governor had dismissal proceedings instituted against him. But I really think that was very much overblown in the scheme of things. If the Reserve Bank governor were dismissed, the deputy governor would automatically step into his shoes. Our advice from Treasury is that that would be an automatic process and that it would not necessarily result in any hiatus of the markets, as has been described by the opposition. It is one of the extra steps that could be taken to enhance independence.

In the name of enhancing independence, the opposition have also called for more committee hearings to question the Reserve Bank of Australia. We had some very useful evidence in a written submission from Mr Saul Eslake, who described the processes as not being particularly useful. He said that the questions ran a line of political argument by whichever side was in opposition, which was generally not terribly successful, or otherwise various members tried to show how in touch or sensitive they were with key issues like interest rate rises, which did not get the committee anywhere at all. It is hard to believe that anything different would happen if the Senate economics committee were involved—although I do appreciate that senators are generally much more considered and wise than our counterparts in the other place. This line of argument is also a little misplaced and will go no further to enhancing any independence by the Reserve Bank. Indeed, I think this is a bit of an attempt by the opposition to try to regain the moral high ground in terms of the independence of the Reserve Bank of Australia, and I do not really think it is going to get them very far in that respect. I think there is genuine all-party agreement about the importance of the Reserve Bank of Australia and that this is a little bit of gilding around the edge.

I certainly support any legislation, such as the government’s bill, which goes towards increasing the authority of the Reserve Bank of Australia and its independence from the government. Since the time that Paul Keating was in government, particularly, the economic education of the Australian public has proceeded at quite an advanced level compared to before. The public of Australia do really understand, because of education not only from politicians but also from the media and because of the general increase in the efficiency of communication around the world, that we are part of a global financial system and that there are a lot of external influences which impact on Australia and which are longer and deeper than the political cycle. That is the particular reason why I support the autonomy of the Reserve Bank, because you have to have that body of people in charge of the financial system who not only are aware of international trends and international impacts and Australia’s impact on the financial system but also are prepared to take that kind of longer term view of the financial system. The Reserve Bank of Australia has shown in the past and just recently that it is prepared to take very hard decisions in the course of maintaining a good and strong financial system in Australia regardless of the political cycle. I think no-one here would say that that is a bad thing, and anything we can do to support the Reserve Bank of Australia in that role is welcome. I do indeed think that this bill supports and expands that role of the Reserve Bank of Australia.

That being said, I think that Senator Murray has a reasonable point in his consideration of not only the Governor and the Deputy Governor of the Reserve Bank of Australia but also the board. It is important, once we have finished this process, that there be some serious consideration of how board appointments are made and how they function. In the past, where there have been any queries over appointments, it has not been the Governor or the Deputy Governor of the Reserve Bank of Australia but the other board appointments that have tended to move more quickly, and, as it currently stands, of course, they move at the discretion of the government of the day. In going forward to the next step in increasing the Reserve Bank of Australia’s independence, that is possibly the most obvious place to look. I would not want to do it without long and deep consideration of the impacts of that—and consulting quite widely within the financial system—because it is important that any replacement, if a replacement is required for the current system, is done thoroughly and properly and does not create more problems than it solves.

This is just a brief speech to reinforce my support of this current bill and rejection of the proposed opposition amendments. I think they are in response to an almost confected concern and, in other cases, do not really enhance the independence of the Reserve Bank of Australia. These first steps by the government are excellent ones to take.