Patrick Secker (Barker, Liberal Party) Share this | Hansard source

Finally, I get to speak on the Reserve Bank Amendment (Enhanced Independence) Bill 2008 after the interruptions that we have had to our business. I note that this whole bill is really just a stunt to try to show this government as being economically conservative. In fact, the then Leader of the Opposition for many months continued to state ad nauseam, ‘I’m an economic conservative and I’m proud of that fact.’ That was Kevin Rudd’s mantra for virtually the last 12 months. He had to repeat that mantra when his advertising agency told him to because when Labor were last in office the budget was $10 billion in deficit. This was after that whole period leading up to the election when the Labor finance minister at the time, Kim Beazley, continued to assert that the budget was in surplus, as they had predicted in their budget before that. Not only was it more than $10 billion in deficit at that time; they had run up $96 billion of debt in their time in government.

If you look at the history of this great country, it is very interesting to note that, in the 90 years from Federation—when we had to build a parliament, a city and all the infrastructure that we needed and when we had world wars and other skirmishes all around the globe—we accumulated as a country a total of $16 billion of debt. So it took us 90 years to accumulate $16 billion of debt. Over the next five years that $16 billion, which took 90 years to accumulate, was repeated every year. So in five years we went from $16 billion in debt to $96 billion in debt. As a result of the good management of the Howard coalition government, we got rid of that $96 billion of debt. The present government now finds itself in such a magnificent position financially due to the Howard and Costello budgets over that period of government.

At the same time that we were reducing this country’s debt of about $96 billion—in fact, we were in surplus to the tune of about $60 billion by the time we left government—the state Labor governments were increasing their debt. If Labor do not do it federally they certainly do it at the state level. In fact they have now increased government debt in Australia almost to the same level as federal Labor had when they were in government from 1983 to 1996. So the states are still increasing their debt—and that is despite the fact that they have had a windfall revenue flow from the GST, and from land taxes because of the value of land. They have continued to increase their debts even with those extra flows.

It is very interesting to look at the example of what happened in South Australia. Despite them probably getting about $500 million extra in revenue than they would have under the old system they frittered it all away. One of the ways they did that was very easy to pick when you look at their employment record. They predicted that they would increase employment in the public service by about 222 people a year—one per cent. You would say that that was pretty reasonable, and after five years you would expect about 1,100 extra people in the public service in South Australia. In fact the increase was 11,000, not 1,100. That is where most of the extra revenue has gone—not through the building of better infrastructure, because we all know that in South Australia they have done very little. In fact, they have been very much a do-nothing government.

This economic conservatism is a mantra; it is a catchphrase; it is political rhetoric; it is a label. And it is about as convincing as a leopard changing its spots. But the now Prime Minister continues to draw upon that sort of mantra to try to convince people he is a conservative. For the first time we have seen a leader doing an advertisement in this country to try to convince people he is an economic conservative, despite the fact that Labor failed to support virtually all the measures that the Howard government took to put this country in the good position that we now enjoy. At every turn Mr Rudd tried to frustrate those efforts by the previous government to enhance its strong economic record.

It follows that, as long as times are good, pretty much anyone can cast themselves as an economic conservative, because the Labor government have the money to spend, whereas when we came into government—as I said previously—we were $96 billion in debt and were facing, in one year alone, a $10 billion black hole. Those opposite are faced with being perceived in such a way because of their appalling record of inability to manage the economy. All of a sudden perceptions count a lot for Labor.

The Prime Minister had to do some pretty slick branding that would address perceptions about previous Labor governments’ inability to manage the economy. That branding has to be full-on and repeated ad nauseum, because the Australian public is pretty much aware that Prime Minister Rudd and his union mates will ruin this economy with their heavy-handed inflationary wage policies.

Perceptions are also what the Reserve Bank Amendment (Enhanced Independence) Bill 2008 is all about. It is a stunt. It is yet another public relations exercise—a bit like calling yourself an economic conservative. This time, however, the perception, notwithstanding its title, does nothing to enhance the independence of the Reserve Bank. The bill makes the Governor-General rather than the Treasurer responsible for the appointments of the Governor and the Deputy Governor of the Reserve Bank of Australia. Their appointments will be made by the Governor-General in Council and can be terminated only with the approval of both houses of parliament in the same session of parliament, and they can no longer be dismissed by ministerial fiat.

I suspect that this is to be used as a further template for appointing a Governor-General in a minimalist republic. Do not be surprised if this template for appointment of the Governor and the Deputy Governor of the Reserve Bank is used in the future to bring on a republic. Some people will agree with a republic and some people will not, but I believe that this is being used as a template for the future.

In practice, however, there is not a serious threat under the existing arrangements to the independence of the Reserve Bank of Australia. Senior officers have always enjoyed a high degree of effective independence, despite former Prime Minister Keating suggesting he had the Reserve Bank governor in his pocket, which treated the position with contempt. Despite that, governments other than that one have recognised that the Reserve Bank governor and deputy governor enjoy a strong reputation.

International capital markets would have reacted severely, by marking down Australian dollar denominated assets, in response to any attempt to compromise the Reserve Bank of Australia’s independence. Section 11 of the Reserve Bank Act 1959 already provides a procedure for resolving policy differences between the RBA board and the government of the day. In fact, the Treasurer can override a decision of the RBA board but the procedures are so politically demanding that their nature reinforces the Reserve Bank’s independence in the conduct of monetary policy.

That no treasurer has invoked these procedures strongly suggests that the existing arrangements already afford the RBA a high degree of effective independence. In fact, the RBA’s willingness to raise interest rates in the middle of the 2007 campaign clearly shows that they are not politically intimidated by any government—and so it should be. The new arrangements proposed in this bill may instead err in the direction of affording the Reserve Bank’s senior officers too much protection. Under this bill, the Treasurer would surrender the right to fire the central bank boss, even if the governor was irresponsible or incompetent. The only grounds for dismissal would be insanity, insolvency, or if the office holder took a second job—which is highly unlikely at the pay that they get. Central bank independence needs to be balanced with accountability for performance, especially in relation to inflation outcomes. Under the new arrangements, it will be even more difficult to remove an RBA governor for poor performance, and I can imagine an opposition using any opportunity they could to make it difficult for a parliament to actually dismiss a Reserve Bank governor. I am sure it would become very political, whereas under the present arrangements, whilst there may be some sort of criticism, the action would be over pretty quickly.

The proposed laws on the termination of office are part of a package which the government hopes will give the Reserve Bank greater independence from ministerial interference. This is at odds with the statement by the then Leader of the Opposition, Kim Beasley, on 11 December 1996 when he said about the Reserve Bank:

The Reserve Bank is overly concerned about the wages position; it has been for some considerable time.

And later he said:

The inflation rate under us—and it will be so under you too—is less than anticipated and therefore, there is room for far more movement in interest rates than immediately meets the eye. I hope the new Governor of the Reserve Bank will bear that in mind.

This is the attitude of the Labor Party, whether in government or in opposition. This unsubtle interference sits well with Paul Keating’s quote that when he was Labor treasurer he had the Reserve Bank in his pocket.

This bill is nothing but a stunt. The timing of the bill is quite ironic. We know the Reserve Bank directors are prepared to use interest rate rises to fight any threat of rising inflation. I wonder how the Reserve Bank directors are feeling about Tuesday’s inflationary budget that actually manages to increase spending by 1.1 per cent in real terms. That is 1.1 per cent above the inflation rate—4.5 per cent in reality. So we have increased spending in the coming year, and by twice that further down the track, and increased taxation and unemployment despite hundreds of spending cuts which most unfairly target rural and regional Australians. There is no doubt that this budget was a kick in the guts for people who live in rural and regional areas.

But not only that, this bill is sloppily drafted and reflects the poor handiwork of those who would call themselves economic conservatives committed to an independent central bank, while at the same time being clueless enough to submit a bill that would allow a corrupt, misbehaving Reserve Bank governor to remain in office because one house of parliament chose not to vote him or her out. The Reserve Bank is a respected, independent organisation. This bill adds nothing to the value of the organisation; rather it is all about perception. The new arrangements in relation to the RBA^’s senior officers reinforce its independence on paper, but in practice the new government has addressed a non-existent problem by taking measures that may actually detract from central bank accountability rather than enhance central bank independence.

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