Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

It is a shame that in relation to a motion that is about recognising 50 years of the Reserve Bank that the member for Fadden tries to claim credit for the Howard government for the entire operation of the Reserve Bank. We need to take a longer view of history and to look at the actual role that the Reserve Bank has played under successive governments. You really need to go right back to the start of Federation to see the evolution of what has now become the Reserve Bank.

With the federation of the Australian states into the Commonwealth of Australia, the first Australian parliament assumed power to make laws with respect to banking and currency. In 1911, the first Commonwealth Bank Act gave the Bank only the ordinary functions of commercial and savings banks. In 1920, responsibility for the note issue was transferred from the Treasury to a Notes Board, consisting of four members, appointed by the government. The governor of the Bank was an ex officio member of the Notes Board. The administration of the note issue was undertaken by the Bank, although the Bank and the Notes Board were formally independent of each other.

By 1924, the Commonwealth Bank Act was amended and the Bank was given control over note issue. Management was then vested in a board of eight directors, including ex officio the governor and the Secretary to the Treasury. From this time until 1945, when there were major changes in the legislation, the Bank gradually evolved its central banking activities, initially in response to the pressures of the Depression in the early 1930s and later by formal, albeit temporary, expansion of its powers under wartime regulation. May I point out that this was well before the Howard government came into office.

The new Commonwealth Bank Act and the Banking Act, both of 1945, formalised the Bank’s powers in relation to the administration of monetary and banking policy and exchange control. Under the 1945 legislation, there ceased to be a board, which was replaced by an advisory council of six comprised entirely of officials from the Bank and Treasury. The legislation specified that the governor was responsible for managing the Bank. However, legislation in 1951 established a new board—at that time of 10 members, including the governor, deputy governor and the Secretary to the Treasury—and maintained the responsibility of the governor for managing the Bank. With minor variations in the number of members this has been the structure of the Bank’s board since that time.

As indicated by previous speakers, the Reserve Bank Act 1959 preserved this original corporate body under the new name of the Reserve Bank of Australia to carry on the central banking functions of the Commonwealth Bank, which has evolved over time. Other legislation separated the commercial banking and savings activities into the newly created Commonwealth Banking Corporation. The Reserve Bank Act 1959 took effect from 14 January 1960, and that is what we are talking about today in terms of celebrating 50 years since then.

There were no major changes in the functions of the RBA until the abolition of the exchange control and the floating of the Australian dollar in 1983 under the Hawke Labor government. There had, however, been a gradual movement to market orientated methods of implementing monetary policy away from a system of direct controls on banks, and in the five years following the appointment of a major financial system inquiry, the Campbell inquiry in 1979, the Australian financial landscape was transformed to a virtually fully deregulated system. At the same time, the RBA gradually built up a specialised banking supervision function.

The Reserve Bank’s board, with respect to the formulation and implementation of monetary policy, is laid out in section 10(2) of the Reserve Bank Act, which is often referred to as the bank’s charter. It says that it is the duty of the Reserve Bank board within the limits of its powers to ensure that the monetary and banking policy of the—

Debate interrupted.

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