Now we know why the Reserve Bank board held its monthly meeting in Perth today. There’s the “get around the states” justification, but it was also handy for the appointment of a new board member in former Woodside CEO, John Akehurst.
Martin Place in Sydney, where the RBA would normally meet, is a so-called declared zone for the duration of APEC, which means police can stop and search people. That wouldn’t do for an RBA board member wandering up to the meeting at 9am this morning, or leaving after a nice lunch.
Akehurst joins from today and replaces the Liberal Party’s favourite, Hugh Morgan, who was appointed by the Fraser Government in 1981 for one term and by the Howard Government in 1996 for two terms.
Akehurst was of course head of Woodside when Treasurer Costello blocked Shell from increasing its stake to a dominating 50% plus back in 2001. Back then the offer price was just over $11 a share. Woodside shares were trading at $45.06 this morning. More recently he was chairman of Alinta which was taken over last Friday and ceases to exist.
He is not an economist, but a representative of the resources industry and if you want that sort of perspective, Perth is where you should be, well away from Sydney.
And there’s a little bit of ironic justice in the appointment: he was flicked from the Woodside board back in 2003 when it was said that his tough managerial style didn’t fit with what the board wanted. Woodside chairman, Charles Goode was said to have helped lever his CEO out the door. Goode is also the chairman of the ANZ Bank and now Akehurst will be on the board that not only regulates the economy as a whole, but keeps an eye on the banks (with APRA, of course). Should make for entertaining small talk at the next RBA bankers’ meeting.
Today’s meeting won’t see the RBA moving interest rates. It will wait to see what happens to the credit freeze, its impact on the cost of money and the funding bases of banks and their non-bank rivals.
The Reserve Bank will have noted the ANZ Bank’s comments on the impact of the credit squeeze pushing up its short term funding costs by 0.25%. That has also flowed from the bank (along with its peers like the NAB, Westpac, CBA and St George) being forced to unwind so-called off balance sheet funding structures and bringing the loans onto the balance sheet. Around $18 to $20 billion is involved, which isn’t much with the big five’s strong capital position, but it will put a crimp on lending for the next few months.
In fact some small non-bank lenders have already started lifting interest rates on mortgages and credit card rates will also rise because they are funded the same way, through short term money market deals. But it’s a bit rich for the head of the NAB, John Stewart, to be gloating as he did on Sky News on Sunday — as AAP reports:
National Australia Bank Ltd (NAB) head John Stewart said it “wouldn’t be such a bad thing” if a few non-bank lenders crippled by higher funding costs were forced to exit the market.
Mr Stewart reiterated that the US sub-prime mortgage crisis, caused by people with poor credit histories defaulting on their loans, would have little impact on Australia’s fast-expanding economy, but could force banks to raise rates.
“… I hope that if the credit markets go back to normal then we won’t have to pass it on,” Mr Stewart told Sky News Sunday Business.
He also called for non-bank competitors to be regulated: just like the banks. That didn’t stop the NAB from losing $360 million of shareholders money in poorly supervised foreign exchange options dealing, something that led to the board and senior management being cleaned out (and his appointment) and the placing of the NAB under the tight supervision (for over a year) of APRA.
Given that background you’d have thought the best thing he could have done was to keep his head down and keep banking!