The Crikey editorial and Michael Pascoe yesterday both tackled the fascinating question of official leaking by the Reserve Bank to a couple of favoured financial commentators. I reckon there is something in this, mainly because the RBA lacks transparency – it doesn’t release minutes of its meetings, hold media conferences or even grant media interviews with governor Ian Macfarlane.
During three years as business editor of the Herald Sun in the 1990s, I was amazed how emphatically and correctly Terry McCrann would predict movements in official interest rates.
McCrann was on the money again this time, as was The AFR’s Alan Mitchell, another tipped recipient of an official steer from someone inside the bank. Alan Kohler is clearly not getting an inside steer and he fessed up about getting it wrong on ABC TV last night, humorously displaying a piece of humble pie with sauce to a national audience of almost 1 million.
SMH economics editor Ross Gittins has been mentioned previously in this esteemed company, but he’s been missing in action for the past few weeks, so we can’t judge his tips. Peter Costello’s ban of Ross Gittins a couple of years back might have been too hot to retain for the Martin Place central bankers.
The deal here seems to be that this select group of leakees adopt the role of a virtual media liason officer for the Reserve Bank. In return for this privileged access to our most important economic policy-making institution, the chosen ones must defend the bank, espcially at critical times like now when the Howard Government has come out swinging after the sixth straight rate rise.
Whilst not wishing to advocate the disclosure of sources, the practice has clearly got to stop now that there is public discussion about it. When Ian Macfarlane retires after 10 years in September his successor Glenn Stevens should try a new approach – greater transparency, including the release of RBA board minutes.
In fact, even having a Reserve Bank board seems odd these days with everyone’s heightened focus on good corporate governance. Peter Costello has simply stacked the RBA board with mates, when many of them have large conflicts of interest. Take Woolworths CEO Roger Corbett. He has a $100 million personal equity play on Woolworths shares and every increase in official interest rates will reduce the value of his holding and slow down the growth of retail sales at his stories.
Given the debt-funded consumption binge of the past few years has put Roger within sight of the BRW Rich List, surely he would not regard any increase in interest rates as justifiable. He’s not much different from the Howard Government, which rarely agrees with an increase, thereby demonstrating the importance of making the bank independent from politicians.
The government recently abolished the Austrade board, so maybe it is time the same was done with the Reserve Bank. Three expert economist or central banker types are more than enough to get the job done.