Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

I think the Reserve Bank Amendment (Enhanced Independence) Bill 2008 is another great example of this government doing what it does best—that is, posing and pretending to care about something and then following up with this sort of nonsense that it can then point to and say, ‘Look, we’ve had a look at this issue and this how we’ve addressed it.’ Unfortunately, what it does when it does that is often, when it comes to address the issue, to do so in a very inadequate and very poor way. It is clear that it does not always understand the consequences of what it is proposing, and I think this bill is an extraordinarily good example of that.

We have in this country, I think, an excellent system of an independent Reserve Bank—a system that was established by the previous coalition government. The Australian public has been very well served by its central bank throughout the whole history of that bank, which has existed since 1911, when the central bank function was within the Commonwealth Bank, and since 1960, when that function was continued within the Reserve Bank of Australia. Australia is held in very high international regard for our well-functioning institutions, our democratic principles and our upholding of the rule of law. I think we disturb all this at our great peril. The Reserve Bank is one of this country’s key economic institutions and, as other speakers have noted, plays a very strategic role in shaping the performance of our economy. It thus plays a very important role in impacting on the wellbeing of all Australians.

We have not heard much about the history of the independence of the Reserve Bank from the government today because their record on supporting the independence of the Reserve Bank is extremely poor. The Reserve Bank was officially made independent by the member for Higgins in 1996, when the new coalition government came to office and he was Treasurer. The then Treasurer jointly released a statement with the Governor of the Reserve Bank that clarified the role of the bank. It was a landmark document and was criticised heavily by the Labor Party at the time. A new and more formal framework for the conduct of monetary policy was agreed to between the government and the Reserve Bank, setting out the inflation objective and enhancing the independence of the bank to make monetary policy settings. Monetary policy would be conducted by the Reserve Bank, with the objective of maintaining the underlying inflation rate of between two and three per cent on average over the course of the cycle. This was substantially less than what the inflation rate had run at through the years of the Hawke and Keating governments.

The independence of the Reserve Bank was further enhanced by the previous government in 2002, when the then Treasurer introduced legislation that gave power to the Treasurer to appoint the Governor and the Deputy Governor of the Reserve Bank. At the time, Labor supported that legislation, which is in marked contrast to their record in this place prior to that. Indeed, I think it is fair for us to ask: where does the Labor Party really stand on the independence of the Reserve Bank?

The legislation that we are debating today reverses the policy that the Labor Party supported in 2002 and was enacted by the then Treasurer. This bill purports to strengthen the independence of the Reserve Bank and enhance the effectiveness of monetary policy. That is what the Treasurer said in this second reading speech. The reality is that you always have to look under what Labor are saying and look at their actions, because their actions very rarely match up to their rhetoric. This bill will create a greater number of uncertainties and problems within the functioning of monetary policy and the Reserve Bank.

We know, from what the Prime Minister and the Treasurer have said on the public record, that they do not really believe that the Reserve Bank is insufficiently independent. On no occasion have they publicly said that our central bank is less independent than any of the other central banks around the world. Indeed, the Prime Minister, as recently as 4 March this year, in answer to a question about what should happen with interest rates, said:

Well you accept an independent Reserve Bank or you don’t.

As I said earlier, Labor heavily criticised the coalition’s reforms in 1996 that acted to enhance the Reserve Bank’s independence. They were so outraged about that legislation at the time that the then opposition leader, Kim Beazley, threatened to sue the Treasurer over this matter. That is how much they believe in the independence of the Reserve Bank.

But they are economic conservatives now because Hawker Britton told them that that is what they would need to pretend to be to win an election, so they say, ‘We now believe in the independence of the Reserve Bank, and we’re going to enhance that independence.’ Sadly, when they came to implement this, they had no idea about what they would do. They came up with this sort of nonsense that will create great uncertainty.

We might recall, if we go back to the years of the Hawke-Keating government—and this is a great example of where Labor has stood on the independence of the Reserve Bank in the past—that the then Treasurer, Paul Keating, used to brag to the Canberra press gallery:

I have Treasury in my pocket, the Reserve Bank in my pocket, wages policy in my pocket, the financial community both here and overseas in my pocket.

Recall also that he made these comments in December of 1990, when the CPI rate in this country was 6.9 per cent and the unemployment rate was 7.7 per cent. That is when the Treasurer was bragging about how he was the one who was in control of monetary policy in Australia. Today we have just another PR exercise from a government that always wants to strike a pose but never really wants to do anything to achieve any actual results.

On 30 October last year, the member for Lilley said:

A Rudd Labor Government will improve the transparency of future Reserve Bank Board appointments and remove political considerations from the selection of candidates. It will also improve procedures to ensure only the best qualified candidates are appointed.

Let us have a look at the track record of the Labor Party in appointing these best quality candidates; let us look at some of the people they have appointed to the board in the past, notable paragons of economic virtue and independent appointment. People such as Bob Hawke and Bill Keelty, that noted independent thinker, were appointed by the Labor Party to the Reserve Bank board. But now the member for Lilley says that Labor would ask the Reserve Bank governor and the Treasury secretary to advise on new procedures to safeguard against candidates with partisan political commitments being short-listed for consideration by the Treasurer. Of course, no-one would have considered Bob Hawke or Bill Keelty to have had partisan political commitments!

There we have Labor’s election commitment on board appointments. There was not a word about any of this, of course, in this bill. Appointments to the Reserve Bank board will follow exactly the same status quo, so maybe we will see future board appointments of such leading lights as Sharan Burrow or Jeff Lawrence. There would be some good condidates in my home state of Western Australia who would make fabulously independent members of the RBA board with no partisan ties; I am sure that Kevin Reynolds or Joe Macdonald will be considered.

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