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Monday, 23 June 2008
Page: 3016

Senator FIFIELD (4:14 PM) —I also rise to speak on the Reserve Bank Amendment (Enhanced Independence) Bill 2008. The bill seeks to amend the Reserve Bank Act 1959 to allow the Governor-General in Council rather than the Treasurer to appoint or suspend the Governor and Deputy Governor of the Reserve Bank. The bill also allows the Governor-General, on motion of both houses of parliament, to terminate the governor or deputy governor on certain grounds rather than the Treasurer. This would indeed mark a shift away from the arrangements introduced by the coalition—with Labor support, I should add—through the Financial Sector Legislation Amendment Act (No. 1) 2002. That legislation amended the Reserve Bank Act 1959 to grant the Treasurer the power to appoint and terminate officers and board members, and was designed to streamline the employment process.

Currently, the Treasurer is obliged to terminate the appointments of either the governor or the deputy governor if they are permanently incapable of performing their duties, engage in any outside paid employment or become bankrupt. This bill proposes that, before a governor or a deputy governor could be sacked on these grounds, there would first need to be a motion carried by both houses of parliament calling on the Governor-General to do so. The current legislation’s section 25 uses the word ‘shall’—that is, the Treasurer must terminate the appointment of the governor or deputy governor if they meet any of the three criteria. It is mandatory.

The bill before the Senate makes termination on these grounds optional in two ways: firstly, the parliament must agree to termination, then the Governor-General in Council must agree to execute the termination. Additionally, the bill is drafted in such a way that a mechanism for termination on the grounds of poor behaviour is not present—that is, if a governor or deputy governor behaves dishonestly or in a way that seriously undermines public confidence, neither the government nor the parliament has any capacity to remove them. Clearly, this is a flawed bill.

At its core, the bill removes the responsibility for dealing with these important matters from the Treasurer and hands them to the parliament. I can understand why you would want to remove responsibility from this Treasurer. When you have a Treasurer who is struggling as much as Mr Swan, no doubt you might want to relieve him of some of his responsibilities. But the solution is not to go introducing poorly conceived amendments to legislation dealing with the Reserve Bank; the solution is to relieve Mr Swan of all of his responsibilities, put him out of his misery and try Mr Tanner, Mr Bowen or Ms Gillard. They are all ready, willing and able.

Why is the government abrogating its responsibilities? Why is the government touting another bill that places form over function? Why is the government seeking to take executive responsibilities away from the Treasurer? If you listen to Labor’s reasons for introducing this bill, they are dressing it up as reinforcing RBA independence. The notion is in the bill’s title. We on this side of the chamber welcome Labor’s new-found commitment to the independence of the Reserve Bank—the reason being: it was not always so. In 1996, it was the coalition that enacted its commitment to enshrining the independence of the Reserve Bank through exchange of letters between the governor and the Treasurer. It was a landmark moment in the history of financial markets in this country. We well remember Labor’s reaction. The then shadow Treasurer, Mr Evans, said that what the then government was doing was illegal, and he threatened to sue in the courts to endeavour to have it struck down. Kim Beazley, then Leader of the Opposition, put out a press release on 13 August 1996 headed, ‘Labor to seek legal advice on Costello bank letter plan’—no support there for the independence of the Reserve Bank. That release that I referred to said they would:

... be seeking further legal opinion on the legality of the Costello proposal, and the option of the Federal Opposition going to the High Court ...

So opposed to genuine RBA independence was the then opposition that they were proposing taking those letters to the High Court—something extraordinary.

As has been made reference to by earlier speakers, who can forget Mr Keating’s attitude to the independence of the Reserve Bank when he boasted that he had them in his pocket? That statement was the single greatest blow to the Reserve Bank’s independence up to that time. The former governor, Bernie Fraser, said of Mr Keating’s pocket jibe:

... it certainly did nothing to enhance the Bank’s standing in financial centres around the world.

So that is the history and extent of Labor’s support for an independent Reserve Bank. Now flash forward to 2002 when the coalition introduced—with support from the Labor, I should add—the Financial Sector Legislation Amendment Act (No. 1) 2002. That act enshrined both the independence of the Reserve Bank and the accountability of the Treasurer. It ensured that the Treasurer had the responsibility for hiring and firing the Reserve Bank office holders. It was sensible legislation, because it streamlined the appointment process.

So here we are today with Labor apparently in favour of an enhanced independence for the Reserve Bank. Yet, even with this apparent change of heart, their bill does nothing to make the Reserve Bank more independent. You cannot achieve this simply by putting the words ‘enhanced independence’ into the title of a bill, like you cannot bring interest rates down by signing a giant cardboard pledge. Labor have not made the case for this legislation. The bank has been independent for nearly 12 years now and has served Australia well. So the real reason for this legislation is clear: it is, not surprisingly, a stunt—a stunt from a government to try and demonstrate that they have genuine credibility as economic conservatives.

I wonder if Labor has considered some questions. Would an economic conservative abolish a streamlined process and replace it with a lengthy procedure requiring a debate and vote of both houses of parliament? No. Would an economic conservative leave open the possibility that a governor or deputy governor misbehaving could not be sacked? No. Would an economic conservative make it possible for a bankrupt to be in charge of the Reserve Bank of Australia, for any period of time? No. Would an economic conservative elevate political stunts over responsible economic management? No, of course they would not, because an economic conservative would be concerning themselves with good policy. An economic conservative is interested in tangible results, not stunts, not headlines.

This is a bill that allows the Treasurer to shirk his responsibilities. It will relieve the Treasurer of his accountability, something Mr Swan, despite his government’s rhetoric, no doubt considers a burden. We all know what the political reasons for this bill are, but what exactly is the substantial point in this legislation? Could any Treasurer get away with sacking independent Reserve Bank governors and deputy governors on a whim? I do not think so. It would be a decision with enormous ramifications, both economic and political. If an RBA governor is acting so improperly that a sacking is required then why can the issue not be dealt with swiftly by a Treasurer?

Financial markets are fluid beasts. They react quickly to events, and impacts on markets are felt almost immediately all around the world. When events unfold that impact on financial markets, governments need to be able to react quickly. We need not leave ourselves open, as this bill would, to the enormous risks associated with having uncertain financial markets await the outcome of a potentially lengthy parliamentary debate on the future of an RBA governor. Any delay in a sacking could create huge threats to the stability and certainty of Australian markets—to say nothing of the impact on financial markets of an RBA governor misbehaving, with the government and the parliament powerless to do anything about it. Imagine the consequences if a Treasurer or a government loses confidence in an RBA governor but is unable to secure the support of parliament to dismiss, or, worse still perhaps, if the parliament refused to carry a motion to dismiss a bankrupt governor or a governor who is incapacitated. And the parliament cannot even consider a motion to dismiss on the grounds of misbehaviour; it can only consider dismissal on the grounds of incapacity, insolvency or outside employment. What about inappropriate behaviour, incompetence, mismanagement or other possible misdemeanours? Surely, such things remain grounds for dismissal?

Let us be absolutely clear. Not only does this bill strip power from the Treasurer to act in these, albeit, unlikely scenarios but the bill also leaves the parliament completely powerless to act. To this end, the coalition proposes that the existing section 25 of the act be maintained. This section ensures that termination on the grounds set out in that section remains mandatory and is to be performed by the Treasurer, who is empowered to act in a timely manner.

The coalition also proposes an additional accountability and transparency mechanism for the RBA governor, requiring him or her to appear before the House of Representatives Standing Committee on Economics at least four times a year. If the Rudd government are serious about its pledge to be more open and accountable, they will support this amendment. If not, they stand exposed as cryers of hollow rhetoric.

The coalition is also proposing a new section 25AA which would provide for parliamentary approval for dismissal of the RBA governor or deputy governor on the grounds of misbehaviour. This amendment would bring the RBA arrangements into line with those that apply to judges, the Australian Statistician, the Commissioner of Taxation and Second Commissioner of Taxation, the Auditor-General and the Australian Ombudsman. These amendments achieve the stated intent of the government to align the statutory independence of the RBA governor and deputy governor with that of the Australian Statistician and Commissioner of Taxation.

Governments must have some degree of flexibility to deal with circumstances as they arise. Yet this bill strips the Treasurer of the power to act in circumstances that, although very unlikely to present themselves, would require swift and decisive action. This bill says the Treasurer is not fit to do his job. On that issue, the coalition, and many Australians, would wholeheartedly agree. But that problem does not need legislation; it needs for Wayne Swan to be sent to a different role.

This bill is rushed, ill-founded and fundamentally flawed. It has the potential to cause havoc in financial markets by creating the possible scenario of a powerless Treasurer and a paralysed parliament unable to deal with a problem that would need to be dealt with quickly. We must not take these risks.