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Thursday, 9 December 1971
Page: 4632

Mr Grassby asked the Treasurer, upon notice:

(1)   Did he slate on 30th September 1971 (Hansard, page 1723) that the Government has no right to dictate to the Reserve Bank how it should act and it would be impudent of the Government to attempt to do so.

(2)   Does section 11 of the Reserve Bank Act provide that the Federal Executive Council may, by order, determine the policy to be adopted by the Bank.

(3)   Did the Royal Commission on Monetary and .Banking Systems (Parliamentary Paper No. 74 of 1937, page 206) find that the Federal Parliament is ultimately, responsible for monetary policy and the Government of the day is the executive of Parliament, and it is the duty of the Bank to carry out the policy of the Government

(4)   If so. does ha reject these powers and abdicate responsibility foc- their use in the national interest or was he unaware of them

(5)   l( he was unaware of the powers, will he now use i hem when necessary in the community interest.

Mr Snedden - The answer to the honourable member's question is as follows:

(1)   The Acting Treasurer's reply on 30th September related to loans to Goulburn Valley canneries from tha Rural Credits Department of the Reserve Bank of Australia. The Government has no statutory power to direct the Bank on the administration of loans made to particular customers of that Department.

(2)   Section II of the Reserve Bank Act requires the Reserve Bank Board to keep the Government informed of the monetary and banking policy of the Reserve Bank. In the event of a difference of opinion between the Government and th« Board whether that policy, is directed to the greatest advantage of the people of Australia, section II gives the Government subject to the observance of certain procedures, power to recommend to 1 he Governor-General in Council that he determine the policy to be adopted by the Rank. However, thin section does not empower the Government to make a determination or give a direction to the Reserve Bank with respect to a loan to a particular person.

(3)   Yes. but the Commission went on to say that this did not imply that there should at any time be interference by the Government in the administration of the (then) Commonwealth Bank.

(4)   The power conferred on the Government by section 1 1 of th? Reserve Bank Act to determine, in certain circumstances, the monetary and banking policy of the Reserve Bank is an important power which is available for use should the circumstances envisaped in that provision ever arise (see also answer lr> O). To date the power has not been invoked.

(5)   See answer to (4),

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