Peter Mair spent almost 40 years at the Reserve Bank and in this article for CFO Magazine he examines how the central bank might communicate better with the Australian people.
The RBA Board is a prop in the mystery. Given the indirect but inherent conflict of private and public interest for most at the table, the RBA Board has, and could have, no collective decision-making role in setting national economic policy. The one remotely possible executive function of the Board would be to unanimously determine the fate of a Governor — to support a Governor unfairly dismissed, or to ‘dismiss’ a Governor who had fairly lost the confidence of all.
Like many other public policy institutions, the central bank — our Reserve Bank — is an invention to defend against democratic excesses, the collateral damage of politicians currying favour with a venal electorate. If the nation were truly committed against inflation the Treasurer could conduct the RBAs monetary policy functions from the Treasury. As it is the RBA, largely separated from the political milieu and related budgetary constraints, has a fashionably independent status.
With both on the RBA Board, there was always a natural tension between the ‘discretionary’, high profile role of the RBA Governor and the ‘essential’ role of the Secretary to the Treasury, played low-key in deference to the Treasurer. Now the dictates of a global economic perspective and the salutary disciplines of free global market forces effectively separate monetary and fiscal policy and constrain the discretionary powers of both the Reserve Bank Governor and the Treasurer.
There is little room left for discretion in national economic policy settings. The continuing challenge is to inform the political and wider community about the situation of the economy, about the policy options that remain ‘live’, and to advocate acceptance of a sensible national strategy to survive and prosper.
It is best that the Governor, the Chairman of the Board, be of independent character. Their political masters choose Governors, and not usually for any demonstrated capacity to bite the hand that feeds them. On the contrary, a government under strain may appreciate an invitation to ‘blame Martin Place’. Competition to be Governor is keen in a select field and the selection process develops a deft balance of otherwise opposing qualities.
The apparently complementary (and soon to be vacant) position of Deputy Governor, (Deputy Chairman of the Board), is relevant only if the Deputy Governor is expected to become Governor in due course. No other member of the Reserve Bank Board can have any particular relevance (in that role). All wise counsel given by non-executive members of the Reserve Bank Board could be received and accommodated by a different process. The nature of the business of the Reserve Bank hardly allows for ‘voting’ by the Board once the discussion is concluded. The Board institutionalises a palatable facade of collegiality
It follows that the Governor decides the content and process of policy communication from the Reserve Bank. The Governor’s choice of ‘content’ and ‘process’ seeks the continuing respect of the government, the Parliament and the wider community. The demands for ‘more’ that occasionally surface in respect of RBA ‘communication’ may be manoeuvres to politicise internal discussions at the RBA Board — discussions that would lose their already very limited relevance if coloured for publication. Exposure would demolish the facade.
Practically the preferred ‘content’ and ‘process’ is the RBA Bulletin and related material now available @ rba.gov.au. Right or wrong, the ‘in’ and ‘out’ of RBA ‘content’ is there for any to see and assess. No errors of analysis or judgment by the RBA are likely to go unremarked. There is an array of economists, often RBA and Treasury trained, waiting to enhance their reputations. The market for economic analysis and advice is vigorously contested.
The community can hardly ask for more. Removing the Governor’s discretion on content published under his auspices may weaken the foundations of the only institution that counts in this game — the Governor’s independence of all undesirable influences, not just politicians on the make chatting up an electorate.