This Wednesday, 21 February, the Reserve Bank meets with the House Economics Committee, chaired by Bruce Baird for the first of two opportunities before the election to discuss RBA policy about the economy and the retail payments system. Some issues in the background, about the independence of the RBA, are unlikely to get a run.
The recent manoeuvring over the appointment of the RBA’s Deputy Governor is symptomatic.
The RBA’s preference for the appointment of Ric Battelino to the vacant position was made evident last August but his formal appointment was not announced until last week, some six months later. Meantime, the Treasurer allowed speculation to run rife that some “external” Dick, Tom or Mike was slated to be appointed instead.
The “so what” concerns the tension created in the relationship of the RBA and the Government. Perhaps there was a sense of new Governor Glenn Stevens being on probation, lest a minder needed to be appointed and otherwise encouragement for perceived attitudes, of other senior people, to be amenable to future employment either in the RBA or out of it.
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Conversely, the RBA likes “short term” appointments to the Deputy role, which later favour an internal candidate when the position of Governor becomes open again. Anyone aware of the consternation in the RBA in January 1989, when the later appointment as Governor of Treasury’s Bernie Fraser was first mooted, would know the RBA would never be caught napping again.
There are other dangers with an RBA that is impregnable to either external influence or political direction short of legislation — the Payments System Board is a case in point.
Some eight years on from the establishment of the PSB, and some 23 years since the RBA was given responsibility for the predecessor body, the Australian Payments System Council, the state of play with the retail payments system remains lamentable.
These concerns, underpinned calls last year for an independent review of the RBA’s stewardship of policy for the retail payments system but, predictably, “no way, Jose!” – on the contrary, the RBA is now embarked on a two-year review of its own policy decisions while the Treasurer has specifically exempted the RBA from any independent review of policy agency activities.
Such “unconditional independence” is conducive to brewing trouble for the RBA’s credibility. The EU and many other countries, similarly afflicted by retail banking cartels acting contrary to the public interest, are separately calling what is essentially a global game and calling it in ways that reflect adversely on the RBA’s still too gentle treatment of the local banking cartel.
Nonetheless, as things stand, there is unlikely to be any probing questioning of payments policy matters on Wednesday – or perhaps for some two years while the in-house review is ongoing.
Then again, ten years on, perhaps plans for another financial system inquiry are being drafted somewhere – let’s hope so.