Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

I would like to thank those senators who have taken part in the debate on the Reserve Bank Amendment (Enhanced Independence) Bill 2008. The measures contained in this bill implement the government’s election commitment to enhance the independence and transparency of the conduct of monetary policy by the Reserve Bank. This is an important component of the government’s strategy to tackle the inflation challenge and help reduce the financial pressures on working families. The independence of the Reserve Bank is crucial in enabling it to achieve its inflation target of two to three per cent over the cycle. The Reserve Bank’s independence in pursuing its inflation target is even more important at a time when the underlying inflation rate is running at a 16-year high. It is vital to the stability of the economy and the living standards of working families that inflation does not get away from us. Higher rates of inflation hurt families and businesses by pushing up interest rates, eroding the value of savings and reducing long-term economic growth.

This government is tackling the inflation problem head-on. The previous government was content to simply leave all the heavy lifting on fighting inflation to the Reserve Bank and higher interest rates. This resulted in eight rate rises in a little over three years. It has fallen to us to deal with inflation and get spending back under control so that fiscal policy is helping, not hindering, the Reserve Bank in the inflation fight. Our budget will put downward pressure on inflation by delivering a strong surplus, cutting wasteful spending and increasing the economy’s supply capacity for the future. That is why it is so important that the Senate pass the budget rather than blow a $22 billion hole in the surplus that is so vital to fighting inflation.

It is also why the Senate should pass this bill, which will strengthen the independence of the RBA. With RBA independence, you are either for it or not. Under this legislation, the positions of the governor and deputy governor will have their level of statutory independence raised to that of the Commissioner of Taxation and the Australian Statistician. As such, their appointments will be made by the Governor-General acting in council. At the moment they are simply appointed by the Treasurer. In addition, and more importantly, the termination of the governor and deputy governor may now only occur if each house of parliament in the same session of the parliament requests the Governor-General to do so. Presently, the Treasurer is able to carry out the termination of either of these positions without reference to parliament. The present situation could leave the governor and the deputy governor in a potentially vulnerable position. Put simply, this bill vests with the Governor-General the existing powers to appoint and terminate the governor and deputy governor that currently rest with the Treasurer.

It has been suggested during the debate that under this bill the governor and deputy governor would no longer hold office subject to good behaviour through the operation of paragraph 24(1)(c). This is not the view of the office of the Australian Government Solicitor. Paragraph 24(1)(c) has always pertained to the removal of a governor and deputy governor from office by a court should they no longer be of good behaviour. This bill in no way changes the clause or its intended effect. There has also been an amendment foreshadowed that would require the governor to appear before the House economics committee four times a year. The governor and his predecessor have regularly appeared before this committee, and at only his last appearance Governor Stevens indicated:

It is really in the hands of the committee how often you want me to come.

This amendment is unnecessary and is an unfortunate effort to score a political point, when the very intent of this bill is to put the positions of governor and deputy governor above partisan politics.

The increased independence of the RBA delivered by this bill is an important component of the government’s strategy to tackle the inflation challenge and help reduce the financial pressures on working families. From day one, the government has taken responsibility for tackling the inflation challenge. This bill supports the efforts outlined in the budget to meet the inflation challenge head-on. In doing so, the government will continue to honour its commitment to help reduce financial pressure on working families, who have made the Australian economy strong. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.