Labor Gives Heads Of Reserve Bank Greater Independence
Friday December 7, 2007
PRIME Minister Kevin Rudd and Treasurer Wayne Swan have declared a "new era of independence and transparency" for the Reserve Bank, announcing a new system of appointing members to the central bank board.The new agreement formally spells out the system of appointments to the two top jobs - Governor and Deputy Governor - saying they will have "their level of statutory independence raised to be equal to that of the Commissioner of Taxation and the Australian Statistician".The appointments will now be made by the Governor-General Michael Jeffery, on the advice of the Government, and they can be sacked only if there is bipartisan approval - a majority vote of both houses of federal parliament. Although there has never been a situation where a board member was sacked, in theory the Treasurer had the power to do it.Board members will now be selected from a list, maintained by the Reserve Bank Governor (currently Glenn Stevens) and the Treasury Secretary (currently Ken Henry) of "eminent candidates".The statement said the changes removed the potential for political considerations in the appointment process and ensured "the best qualified candidates" were appointed to the board."The procedures, in effect, allow the Government to determine policy in the event of a material difference; but the procedures are politically demanding and their nature reinforces the Reserve Bank's independence in the conduct of monetary policy," the statement said."Safeguards like this ensure that monetary policy is subject to the checks and balances inherent and necessary in a democratic system."The statement also read that the Reserve Bank Board shall, from time to time, inform the Government of the Reserve Bank's policy. During the Howard Government, board member Robert Gerard, appointed to by Peter Costello, was forced to resign in 2005 after it was revealed the company he chaired was the target of a tax investigation. Mr Costello said he had not been told about the dispute at the time of Mr Gerard's appointment.Deutsche Bank chief economist Tony Meer, who once worked at the Reserve, said the changes remove "any suspicion that the recommendations of the bank . . . can be unduly influenced by the Government".