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"Fightback" - setting the record straight like it or not Bernie has to deal with the credibility gap



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Peter Reith

DEPUTY LEADER of the OPPOSITION SHADOW TREASURER PRESS RELEASE

•FIGHTBACK' - SETTING THE RECORD STRAIGHT

LIKE IT OR NOT BERNIE HAS TO DEAL WITH THE CREDIBILITY GAP

The Reserve Bank Governor, Bernie Fraser, set out in his speech tonight to build a case to resist change of the Reserve Bank Board's charter and composition.

But his arguments are unconvincing. Like it or not, the Reserve Bank suffers from a credibility problem.

That credibility problem, in turn, stems from at least four instances which many in the market saw as being highly politically influenced:

. the bank holiday massacre of 1984;

. the pre-1987 election easing, subsequently reversed on the advice of Treasury officials;

. the delays in tightening of policy because of the New South Wales election in early 1988; and

. the special deal, handled by the Governor himself, with the four major banks to artificially hold down mortgage rates in 1989.

These concerns have been compounded by the ex-Treasurers boasts.

Whether or not these sceptics are right is not the issue.

The damage has been done.

Rightly or wrongly, the Labor Government has damaged the credibility of and confidence in the institution.

As we move towards the massive restructuring task which must be tackled in the 1990s, investors and savers must have confidence that the Reserve Bank will persistently pursue definable anti­ inflation objectives free of the suspicion of political influence.

The changes to the Bank's charter and organisation proposed by the Coalition are essential to that outcome.

28 November 1991 Canberra Contact: David Turnbull (06) 277 4277 D152/91

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH