James Stevens (Sturt, Liberal Party, Shadow Assistant Minister for Government Waste Reduction) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023. It's been made very clear that the opposition will not be supporting the government's proposals here to reform the Reserve Bank Act. We approached this topic with a great deal of good faith, and it is very disappointing that the government has taken us to the point where we can't work with them and support them in reform of the Reserve Bank, because the thing I do agree with the Treasurer about is that these things should be bipartisan. We're talking about how the monetary policy of this country operates, and how the trusted organisation—the Reserve Bank—which quite rightly has independence from political interference, operates, governs itself and makes decisions that affect every single Australian. It is disappointing that the government is now pursuing reform without bipartisanship. This brings back memories of the last time they did this on something that required bipartisanship: the Indigenous voice referendum. We all know how that ended up. We'll see what negotiations they do in the Senate with the minor parties, but it's very regrettable that they want to push forward with reform of an institution that should be above partisan politics—the Reserve Bank—without bipartisan support.

What's just as regrettable is the behaviour of members of the broad Labor family on the record and off the record in the last few weeks, deciding to now start to turn the RBA and its decision-making into some kind of political attack point, deciding that they're feeling so much heat from the electorate in this cost-of-living crisis that maybe they can make it all someone else's fault. Some comments have been veiled. Some have been more direct. Some people have been cowardly and not put their name to their commentary in off-the-record briefings to journalists. The Treasurer has been very wishy-washy in what he's had to say and the confidence that he has and hasn't at different times expressed about the way in which the RBA operates. Former Treasurer Swan was outrageous and appalling in just the last week in the way in which he launched his own attack on the Reserve Bank and the decisions it is making.

The Reserve Bank is doing what it needs to do, which is make decisions with the policy lever it has: monetary policy, the cost of capital in our economy. If they were working in concert with those that have the fiscal policy lever—the federal government—then they might not have had to make some of the decisions that they have in the last few years since Labor was elected. I, like everyone, wish interest rates were lower, not like the government, because they're worried about their own political future, but because I genuinely care about the people who are struggling to meet the costs of their mortgages and other debts that they might have because interest rates have so dramatically increased since Labor came to power. But, of course, monetary policy interacts with fiscal policy. Monetary policy can loosen, encourage and stimulate the economy or it can contract to dampen the economy. The Reserve Bank has to make decisions based on their forecasts and various other sources of information that they have access to to make judgements on how the economy is travelling and, in particular, their primary goal, which is to make sure that inflation is kept between a target band of two and three per cent. That hasn't been the case for the last couple of years.

The Reserve Bank has increased the overnight cash rate, which obviously results in a cascade of rate adjustments across the various loans in our economy. The Reserve Bank is the most reliable lender in Australian currency. They print the Australian currency, so they're the most reliable lender. Whatever their rate is, every other rate will be set against it. The most significant one for any Australian is their mortgage rate. Mortgage rates are running high because the Reserve Bank has had to increase interest rates to try and tame inflation.

Fiscal policy can play a big role in inflation because government spending is an enormous part of economic activity: when it expands it fuels inflation, and when it contracts it puts downward pressure on inflation. We have a situation where the Reserve Bank, who are doing all the heavy lifting when it comes to addressing the overheating economy and high inflation, are now being attacked by the government. The government are not doing what they could with their own policy levers and are instead deciding to set up the RBA as a kind of straw man in the economic argument, as they heads towards an attempt to get themselves re-elected.

Politicising the RBA should be a no-go in our modern democracy. This wasn't always the case, and certainly in decades gone by there was a lot of politicisation of decisions of the Reserve Bank. Obviously, when government are thinking about electoral cycles and deciding what may or may not have a short-term benefit or hit to their political fortunes, that can cloud their judgement in making decisions in the best interests and the long-term price stability of our economy. Clearly, we should absolutely cling to the RBA's independence of politicians and election cycles and to the structure we have now, where the Reserve Bank operates independently and makes decisions in the medium- to long-term interest of price stability in our economy, not taking into account the political impact for any particular side of politics, particularly the government of the day.

What we've seen in the last few weeks, and what we're now highly suspicious of, which leads to us not being able to support these proposals, is the repoliticisation of the Reserve Bank, with political leaders cowardly starting to blame the Reserve Bank, criticising it and attacking it through the media. I'd love for the Reserve Bank to reduce interest rates, but I want them to do it because that's the sensible monetary policy decision to make. That will give them confidence that, by reducing rates, they can keep inflation in our economy within that two- to three-per-cent band, which we're not yet at. If the government of the day, this Labor government, wants to see interest rates reduced, it should think about what it could do to help the Reserve Bank have confidence that price stability in our economy, the inflation rate in our economy, is running in that target band.

In the decades gone by, when governments interfered in these things and either blatantly made monetary policy decisions directly or had shadowy processes that really meant the Treasurer or finance minister of the day was exerting influence on monetary policy decisions, we had rampant inflation. That was the case across different sides of politics, I might add, and it's clearly the case around the world where counties don't have independent monetary policy setting by their central banks.

The worst way to destroy wealth, to crush wealth, is for inflation to erode it away, because it gets absolutely everyone. It gets asset holders, it gets consumption and it gets real wages. No-one in the economy is rewarded in a high-inflation environment. Even worse than high inflation—or equally as bad—is high price volatility, where policy settings are changing dramatically. We see that overseas with countries that devalue their currency or bring about dramatic steps in their cost of capital by the way in which they set their cash rate at the central bank level. Business and investment completely evaporate away from those economies. We are very lucky that we've had decades and decades in this country where there has been very high confidence. Our independent central Reserve Bank and our floating exchange rate mean that there is a great deal of certainty for markets and for investors in our economy that kneejerk policy decisions that could leave capital stranded or dramatically devalued in our economy won't be made.

Our economy, particularly our jobs market and people's standard of living in this country, is very much contingent on strong investment that drives an expansion of the economy, economic growth and—the most important thing in our social compact—sharing the dividends of economic growth between those who invest their capital and the workforce of the economy—making sure that real wages are growing. Wages can grow on paper nominally, and if inflation is running hotter than that—as it has for the last couple of years—then workers are going backwards. Through a lack of price stability and high inflation through the politicisation of the central bank decision-making process, the biggest destruction of wealth will come to real incomes. We know that from any study of the history of high-inflationary environments.

We regret that we're not having a debate where there is genuine bipartisan support for reform to the Reserve Bank Act. That's very disappointing because it's the sort of thing that should have bipartisan support. When the Hawke-Keating government undertook the reforms that they undertook, that included central bank reform and, most importantly, things like floating the Australian dollar and having a market mechanism for the determination of the Australian dollar, which was politically difficult terrain to traverse. That was done with the support of the then opposition. Whilst what's in this bill is not in the league of those dramatic reforms, it's in the category of them, and it's really disappointing that the government's attitude is that they don't want to work with us in reform that everyone can support to something as significant in our economy as the governance of the Reserve Bank. With those comments, I urge the House not to support the second reading of this bill.

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