Domainfax is campaigning to retain its position on the Reserve Bank Board:
Staying in the RBA orbit, our former chairman Roger Corbett‘s 10-year stint on the Bank’s board comes to an end on December 1. The November 3 meeting will be his finale.
Will Prime Minister Malcolm Turnbull and Treasurer Scott Morrison do the right thing and replace him with new Fairfax chair Nick Falloon?
Let’s hope Scott and Malcolm have the sense to keep Domainfax as far from the monetary levers as is humanly possible. Conflicts of interest are stock in trade for the Australian oligarchy but even in Banana Republic terms having the nation’s largest real estate spruiker in a position able to directly influence interest rates is low quality public policy execution.
Let us recall what Professor Warwick McKibbin said as he departed the board in 2010:
Outgoing Reserve Bank board member Warwick McKibbin has called for an end to the majority of business leaders on the central bank board because they might not be tough enough on inflation.
The call from the Australian National University economics professor comes amid widespread business complaints that the non-mining economy is being crunched by the Reserve Bank’s 4.75 per cent cash rate and the strong dollar.
There is no evidence that the business majority on the Reserve Bank board has ever rebuffed Reserve Bank governor Glenn Stevens, but the politically independent central bank faces a growing conflict between the softening non-mining economy and its official forecast that inflation will bubble up above its 2-3 per cent target. And its board may have become more “dovish” following this month’s exit of inflation “hawk” Professor McKibbin and former Telstra chairman Donald McGauchie.
The nine-member board includes two professional central bankers – Mr Stevens and his deputy, Ric Battellino – along with Treasury secretary Martin Parkinson.
Unique among the world’s central banks, the majority is held by five business members: former finance executive Jillian Broadbent; Fairfax Media chairman and former Woolworths boss Roger Corbett; BlueScope Steel chairman Graham Kraehe; former Woodside Petroleum chief executive John Akehurst; and BG Group’s Australian head Catherine Tanna.
At the time I defended the board given it had done a good job across that year (even if it over-egged the dollar). But these days I can no longer do so. The RBA’s dash from conservative defender against further increases in household indebtedness in 2010 to outright housing bubble spruiker just two years later is one of the most egregious failures in recent monetary policy history and has directly resulted in the dumb bubble:
Do not mistake me. I agree that the RBA should have lowered interest rates. In fact, it should have lowered them a lot further, a lot sooner to crash the dollar. But the failure to introduce macroprudential controls in time to cap the credit explosion was unforgivable. And who knows what role the RBA board, and the Domainfax director, played in that dilly-dallying?
Frankly, at this juncture, we can say without hesitation that the performance of the RBA board has been poor enough in the past few years that it is time all business rent-seekers were tossed off it.
Let’s face it, it’s a poor look.
