The RBA is in disgrace


It is one of the more weird characteristics of Australian economic commentary that the Reserve Bank of Australia enjoys an untouchable position. Bank economists and economic observers all hold the central bank in very high esteem, to the point where it is borderline criminal to question the monetary authority.

Some argue that this is the fruits of 22 years without recession (so long as you cherry-pick your metrics). But there is another reason. The world of employed economists in Australia is very small and you don’t want to be marked as a trouble maker if you intend, as many do, to move between public and private offices over your career.

Which brings me to last night’s Four Corners episode that recounts the allegedly corrupt histories of the RBA subsidiaries, Securency and Note Printing Australia, as well as at the bank itself.

If you missed the program I suggest you set aside 45 minutes to watch it in the near future. It is here. I’ve been aware of most of the allegations for years but to see the entire story told from beginning to end is really something else. It is shocking.

The program describes a culture of systemic lying and greed, of economics without ethics, of total failures of governance, of group think and entitlement throughout the elite levels of the RBA’s subsidiaries and perhaps at the bank as well. I have had my faith in the institution shattered and only a full and open inquiry has any hope of restoring it.

I have no idea if anything will come of the investigation. Probably not. But the stain upon the Reserve Bank of Australia will thus be all the more indelible.

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. @HnH

    I think the core problem in this specific saga is that both the NPA and the Securency were made to operate for profit. Given their strategic importance, they should not have been made to operate for profit in the first place. After all, who would want to make AFP/ASIO/ADF operate for profit? If the government (read; the taxpayers) was trying to save a few bucks by making these two organizations operate for profit, and lost a lot more than they saved as a result, then it is a strategic folly of the first order

    The people in question are already wealthy. I do not believe that they would want any more money. If there were one more thing they might still want, it would be power/influence/control. I therefore think we should consider the (likely) scenario that these poor souls were under pressure to make ends meet for the NPA/Securency (i.e., were assigned revenue targets from stupid taxpayers every financial year).

    A rational mind would ask; why would we want to forgo long term prosperity for short term profits?

    Well, we already know the answer to that question, don’t we?

      • Well, yes, but how can you prevent a similar event from occurring in future if you do not look at the root cause? (I would include the damaged brand name of the RBA to the aforementioned loss to the government/taxpayer/nation)

      • “Well, yes, but how can you prevent a similar event from occurring in future if you do not look at the root cause?”

        You can start by investigating what happened and ensuring that the perpetrators are punished if they have broken the law.

      • Let’s assume people (taxpayers) were to sue them for the damage. I think the case would be materially weaker if the taxpayers had been demanding annual profits from them.

      • “You can start by investigating what happened and ensuring that the perpetrators are punished if they have broken the law.”

        Don’t get me wrong. As I posted yesterday, I fully support the Royal Commission. And I think it is of paramount importance to ensure that the commissioners are free from interference.

        That said, it is mind-warping that these officials did what they were alleged to do without any apparent motives (I do not believe in an action without a driving force). I know people do many strange things, but are they that stupid?

      • HnH: “…Australia Post makes big profits and doesn’t behave this way…

        …as far as we know. I dare say that many would have thought the same about the RBA and Securency too at one point.

        In addition, AP has much less scope for overseas fiddling because it operates under very long standing reciprocal agreements.

        I don’t disagree with the point that those responsible need to be pursued, be they in Securency or the RBA. However, I do agree with others that the root causes need to be determined precisely because the RBA is so important. The reason for this is that while there may be some negative consequences for failings at the top of our large public and private corporations, but the negative consequences for failings at the RBA are (IMHO) an order greater.

      • These posts absolutely astound me in their pure naivety.
        Motive: All these members are now serving on private enterprise boards which most probably pay much larger salaries than their RBA ones. Had their enterprise turn into a global success they would have multiple offers to sit on numerous boards throughout AUS as they demonstrated their ability to turn a profit.

        Issues: Why is it that these two men were the only ones to identify these issues, there is obviously a a spineless cohort within these companies that would rather these issues not be addressed and so this would happen in the future.

        HOW: Governments work in industries where they are monopolies and as such they only KPI’s that matter are those ones where there is only good news. In PE if you don’t make a profit then there is a review or you fall out of the market, in government the only factor is bad press. So it is better to keep your mouth shut and be promoted than do what these guys did, blow the whistle and get moved out.

        The immoral and spineless win.

      • notsofastMEMBER


        What matters is that the right people are in the RBA to uphold its mission.

        The mission being, of course, is to do the bidding of the elites. When the office bearers can no longer or refuse to fulfil this mission then it is time for them to go.

        The other mission that most people think the RBA its about, you know economic stability and the economic prosperity and welfare of the people of Australia, is just for show.

      • Are you kidding, what value do they uphold? They are BANKSTERS, they don’t have any value, than money in their minds, did you forget that?

        I think I am naive, but you people shouldn’t be as you come from financial industry and you know what it is all about.

    • dumb_non_economistMEMBER

      Well, what can one say now about private enterprise Vs the public sector. I watched 4C’s last night and all I can ask is what sort of risk assessment was done in the race to make a buck? I’ll bet this farce was known of overseas before last night, so the RBAs rep is in tatters and what was the potential gain…..a few hundred mill, well done gentleman, way to go!

      If the smell doesn’t go all the way to the top, I’ll eat my hat.

    • The people in question are already wealthy. I do not believe that they would want any more money.
      I’m not quite sure how this is a reasonable conclusion. Very wealthy people are typically driven to make even more money and will happy exploit/abuse/mislead/whatever others to do so, even though the benefit to them of that extra money would be insignificant, at best.

      You need look no further than the esoteric methods the wealthy use to avoid tax for evidence of this.

      Get a room full of rich people, and you’ll have well over the statistically average proportion of psychopaths.

      • “Very wealthy people are typically driven to make even more money and will happy exploit/abuse/mislead/whatever others to do so, even though the benefit to them of that extra money would be insignificant, at best.”

        Ok, be that as it may, my main point is that the main cause of the current saga is the quasi-privatization of the RBA subsidiaries. Gunnamatta has a good post below.

        I am afraid if we do not go to the bottom of this RBA/Securency/NPA affair now, the next thing we know could be something like an ANSTO officer being caught for trying to smuggle nuclear materials to North Koera.

      • “The people in question are already wealthy. I do not believe that they would want any more money. ”

        A few thousand years ago, the Greek thinkers Plato and Aristotle believed that greed, and desires for material wealth, would come at the expense of one’s ethics — and that, “Greed would be at the root of personal immorality”.

        Plato’s and Aristotle’s ancient wisdom has been corroborated by a series of studies carried out by Drs Keltner and Piff at the University of California, and their colleagues.

        Their first two studies showed drivers of more expensive cars were more likely to break the California vehicle code — either in pushing their way through intersections, or by cutting off pedestrians at marked pedestrian crossings.

        The third study showed that upper-class individuals were more likely to act unethically or dishonestly in a series of eight different scenarios.

        In the fourth study, upper-class participants were more likely to take individually wrapped candies, that were kept for children.

        In the fifth study, participants carried out staged negotiations — and the more wealthy were more likely to tell lies.

        In the sixth study, the upper-class were again more likely to lie and cheat in order to increase their chances of winning a prize.

        And in the seventh study, people from upper-class backgrounds were more likely to endorse unethical behaviour at work.

    • There needs to be fair and transparent assessment conducted. These individuals approved potentially unlawful acts and must be investigated to the fullest. Unfortunately as their supposed deeds are already in the public spot light the investigation must be transparent and accountable. It is in not in our national interest for there not to be a full and transparent investigation. As an outsider this is a disgusting example of boys club corruption.

  2. “Bank economists and economic observers all hold the central bank in very high esteem, to the point where it is borderline criminal to question the monetary authority.”


    If there is to be an inquiry it should extend to a fundamental review of the role of the RBA, its charter and specifically how it conducts monetary policy when inflation is low.

    The outsourcing of economic management to the RBA and the level of economic activity to the household balance sheet has been a failure – the extent of which being concealed by thicker coatings of cheap plaster and a big pair of can kicking boots.

  3. Don’t forget ASIC!!.

    In fact, ASIC’s press release is a cruel self-parody:

    More broadly, ASIC’s enforcement record is solid:…. Our actions against widespread problems at Commonwealth Financial Planning Limited (CFPL) resulted in:
    * seven advisers banned;
    * a comprehensive compensation program that has seen more than 1,100
    investors receive $50 million to date; and
    * CFPL entering into a court enforceable undertaking that required it to
    reform completely the way it does business and deals with clients.

    and.. wait for it…

    ASIC admits it was slow to assess Commonwealth Financial Planning advisers

    Do these [email protected]#ktards even realize that there is something called Google? CFP whistle blowers blew the whistle for 18 months until they were blue in the face, before ASIC finally slapped a few wrists and that was it.

  4. reusachtigeMEMBER

    I think the worst thing about all this is not that they are all crooks (you’d expect that, they’re banksters FFS) but that people actually think these institutions are flawless and have everyone’s best interest at heart. LOLOLOL!!!

    • whose interest at heart?

      Actually I am not sure who benefited from their alleged criminal activities (except for the middle men and the corrupt offshore officials who received cash). Perhaps they had crooked bonus structures for the boards in place?

      Hopefully the royal commission is going to find out all….

  5. HnH
    To make any difference in the future you have to stressfully tell it like it is.
    The double speak and innuendo carried on by politicians and economists and those responsible for the governance of the economy, has lead this nation down the garden path to ruin.
    What the readers of MB and the public require is facts presented through straight talk so no one is left guessing of the intention of the message.
    To turn this country around is going to require strong leadership as the population struggles in the mire of debt and misplaced investments.
    Get angry and keep up the good work. WW

  6. Paging Dr Friedman… Dr Friedman… we have a non economic rationalist trying to impinge on *Freedom* with some rules or laws thingy!!!

    Bring the praxeology crash cart stat! – Herbert Spencer will be assisting.

    skippy… diagnosis – rogue DNA – treatment – Lamarckism injections to facilitate DNA reordering to proper Homo Econ maximizing utility levels. Snicker~

  7. I saw the report. I was dozing in front of the TV when it started but very quickly snapped awake. Riveting stuff.

    The most damning indictment, for me, came at the end when someone was asked what they thought about the whole thing. The responses were (not verbatim)on the lines of:

    “It seems there are two rules. One for them, and one for everyone else”


    “It seems some people are held accountable for what they do, and others are untouchable”.

    Not to minimise the seriousness or anything but isn’t this what tends to happen everywhere in the world? Those who have power and those with a line to this power get away with murder; the rest of us suckers take it in the neck.

  8. One person’s facilitation payment is another’s bribe.

    The officials at the RBA and subsidiaries clearly acknowledged how business is done in some countries and whilst intellectually not ideal were comfortable enough with the concept to proceed – and continue to proceed well after expressions of dissatisfaction from two individuals. Two individuals who appeared
    ‘shocked’ at discovering this day to day reality and the RBAs accommodative participation.

    I was interested that Freehill’s found no evidence of illegality and it appears that such legal advice may well indemnify the RBA elite from further legal action.

      • Ha! I was about post along the same lines, about paid-for arse covering “advice” from Freehills/KPMG/PwC.

        Worst part about RBA engaging Freehills & KPMG is that it is paid for by us taxpayers.. i.e. they use our money to work against our interest!!

      • This is standard corporate practice. Get it signed off by legal prior or obtain necessary opinion post.

        I have an excellent tale to tell of an enterprise I was once with where every, and I do mean every, endeavour was by the seat of your pants, frankly borderline but good legal opinion provided necessary support. Worth every penny.

      • This is standard corporate practice.

        ahh.. yes, the banality of evil.

        It was standard practice to burn “witches” medieval times, with the legal sanction provided by none less than the Catholic church.

        It does not make it right though. But I guess they scrimped on putting the ethics chip into the minebot circuitry.

      • @Mav,

        This is sort of off-topic, but the “real” witch hunts & trials cannot be solely attributed to the Catholic church (e.g., the infamous Salem witch trials occurred as late as 1692 and had little to do with any church). Some of the tragedies had something to do with the churches for sure. But the true nature of the witch hunts & trials was far more sinister than what could possibly be attributed to ignorant masses or religious bigots. If you follow the timeline, you will find some astonishingly inconvenient truth for the elites today; Many of the supposedly “enlightened” minds (intellectual leaders) at the time like Francis Bacon were the advocates (or sometimes practicioners) of the witch hunts & trials. I do not fully understand what this means yet.

      • @dumpling… re Salem, anthro evidence supports moldy rye bread and resulting hysteria. Such a case occurred in France circa mid 1900s, hole town went Bonkers. This mold / fungus poisoning is implicated in many historical events.

        skippy… Grateful Dead concert where noone were told they were high.

  9. “Some argue that this is the fruits of 22 years without recession (so long as you cherry-pick your metrics).”

    HnH, can I ask what metric you prefer to use to define national recessions?

    • GDP per capita? Gross National Income? Unemployment? There are plenty of possible metrics to choose from. GDP alone seems like a pretty loose indicator.

  10. The RBA currently employs just over 1000 people, and has an approximate staff turnover of about maybe 10% of that per year. About 90% of those are located in Sydney.

    I think the thing you need to remember is that at its very core there is a significant APS style culture which is part of the genetics of the RBA. Its people are employed under the RBA Act, in a similar way in which CSIRO people are employed under their own act – not APS act, but relatively close conceptually. It is at once the most exclusive economist employing organisation, financial markets participant Australia, yet somehow free from the need to ‘sell’ anything to clients to make its buck. Its ‘clients’ treat it with the utmost respect – a respect quantifiable in the premium time with the RBA adds to the salary packages of people who later head to Macquarie, the retail banks, or more often JP Morgan, the squid, etc. But befitting an organisation where the cultural ethos is one of ‘being in the organisation’ in a way that maybe only Jesuits and people familiar with more devout religious practices would understand, for many people there it would be paramount to them that they are employed by the RBA. In many ways the organisation itself would be sacrosanct in their minds – they would tell you (should you ask) that what they do is of vital importance to the people of Australia, who generally don’t understand what they do or the circumstances in which they do it. In this view of their organisation they would have some similarity to more prestigious government related science (the divisions of the CSIRO, DSTO, or the Antarctic Division) the security world (parts of Defence, ASIO, ASIS) or the world of ‘Policy’ rather than practice (Treasury, DFAT, and a load of similar state based entities).

    The one thing all these types of organisations have in common is an external façade of pre-eminence, a particular reticence to be openly accountable for anything (to the public, political masters, participants in whatever market or field of endeavour they are in), and a disturbingly prevalent view that their people are important for what they know rather than what they do. That often comes with a pronounced tribalism within the organisation – various directorates, branches and divisions replicating the organisational ethos at a lower level.

    In the late 1990s, having had some experience in dealing with the types of issues these types of organisations can throw up, I spent a couple of days while in Sydney chatting with people from the RBA who told me more than enough to know that what I have written above is broadly accurate for the RBA of that time (and may well still be). At that time one of the major issues facing all of these organisations (and rightly so in my opinion) was the need to be seen to a fairly new Liberal government that they were accountable, and, in accordance with the political will of the day, to show that they could corporatize, outsource, or somehow embrace the corporate world in its approaches. This lead to some interesting phenomena – where what were APS or para APS like organisations started ‘engaging with risk’ or ‘cultivating entrepreneurialism’ or whatever the mantra was in the organisation. Often what you found was that a batch of indigenous employees from the organisation had been slapped under someone from the private sector (or someone taking a lot of private sector influence, usually from a load of consultants brought in) who sometimes didn’t understand public sector processes and particularly public sector accountability requirements.

    If you want to see some dysfunction related to this look at Defence acquisition processes, or property development/disposal processes, the IT contracting processes of almost any organisation, the commercialisation of a number of science related projects, the contractor or consultancy award process in almost any organisation – at that time, and possibly still so. I tend to see what we know of what happened with the RBA, NPA and Securrency in this light. They certainly weren’t Robinson Crusoe in getting their fingers burned by something commercial. You could bet your bottom dollar there was someone somewhere banging on about going the extra yard to make a sale, presumably with someone with some sort of ‘local’ experience (no matter how specious this could be) telling them this is the way business was done here and that if they wanted the sale then this is what they needed to do. In all, I suspect you may find it is small fry compared to what British or US Defence contractors get up to, to make their sales. Cock ups happen – never more so than when policy types from one part of the world start trying to make sales in another.

    But that brings us back to the nature of the organisation. This type of organisation has a few distinctive traits when it comes to dealing with bad news. They know how to deal with the political process very well, and they know how to deal with the public sector auditory processes well. Traditionally this revolves around the compartmentalisation of information and – particularly in that era – a nicely delegated responsibility which often works to ensure that those at executive levels don’t know anything which may come back to haunt them, and that if they do then they certainly can’t be proven to know (or have known). There has been a long time since the events described here, certainly long enough for key individuals to have been moved on to the private sector or elsewhere in academia or the public sphere, or even just to have been redunded out. In the same way you could be fairly sure that any files relating to the events have been thoroughly searched – meaning incriminating pieces of paper have been well buried or simply don’t exist. The other thing to bear in mind is that the RBA can quite plausibly point to having offloaded the cankers in the past (particularly seeing as they don’t relate to what the RBA would see as its core functions), and that there will be an increasing number of people in the organisation who can quite legitimately say they know nothing of events.

    Absolutely nobody should assume that decisions made in this type of environment are either 100% perfect from some sort of technical sense, in any way pure, or haven’t been critiqued from within the organisation itself (and that there will be people within the organisation, if not whole sections, who know about and disagree) . The RBA presents a an austere front, long on unquestioned gravitas and demanding of esteem, and as HnH notes it is certainly looking like something of a blemish on that façade has occurred. But it is also true I think that there will be those in the RBA who will think they have played it out about as well as it could be played out and that if they keep themselves disciplined then it will blow over, and that if anything does happen it will not occur in such a way as to trouble the core operations of the RBA.

    • Why wont people say the dirty word… Neoliberalism… Chicago school… the operative economic paradigm emanating from the worlds largest economy for over 40 years and the ensuing deregulation oversight of economic activity in order to chase profit yields.

      Do we have to suffer another GD just to relearn stuff, refute a failed ex nihilo ideology?

      • @smokster… That distinction has become quite fuzzy as both increasingly serve the same master. Seriously Rubinite Krugman et al[?], neoliberal light posse ie socially inclusive of LBGT sort of ID political machinations, yet are fundamentalists when it comes to unfettered free market dogma.

        I find hardly any distinction between R&R and their ilk except for public posturing.

    • +1

      ” At that time one of the major issues facing all of these organisations (and rightly so in my opinion) was the need to be seen to a fairly new Liberal government that they were accountable, and, in accordance with the political will of the day, to show that they could corporatize, outsource, or somehow embrace the corporate world in its approaches. ”

      I do not believe that the banknote-to-Iraq scandal in 1998 is unrelated to the inception of the Howard government.

      You know what I am thinking? I think if we do not go to the bottom of this RBA/Securency/NPA affair now, the next thing we know could be something like an ANSTO officer being caught for trying to smuggle nuclear materials to North Koera.

      Let’s just say it won’t be pretty…..

    • PolarBearMEMBER

      Thanks Gunna, very illuminating to consider the practical and organisational sides of these events.

      • PolarBearMEMBER

        Just watched the 4-corners episode. Shocking. The elites slither away because the actual corrupt payments were done by someone lower down than them. But the board members were directing the whole show. Disgusting.

      • Watched whole thing again and made some notes while doing so…

        For mine what has transpired exactly reflects what I was talking about. The offloading of NPA and Securency has been deliberately to get around the probity considerations which need to apply to RBA activities directly. Someone has set up the network of agents before the company secretary and sales manager have twigged circa 2006-2007 and asked questions. One would want to be careful about nominating who but decade long executive level servants might figure prominently in consideration.

        Then once the issue has arisen on how to manage the whistleblower they have been all at sea. That’s actually the default position of most organisations to any form of code of conduct illegality issue. Most organisations – private sector as well as public – stuff these right up.

        The standard practice would be to investigate claim internally, report to whoever it is they report to, relevant authorities, and individual raising concerns what has been determined. It would appear they have known outcome and have known they didn’t want it looked at but have not known how to shut up the whistleblower, and have then stuffed their position by shelling out a redundancy to him and slipping a pointed reference to him at his farewell, then giving him an early termination march off – straight out stupidity from an organisational point of view.

        Presumably the HR manager/risk manager or whoever was incompetent or not listened to by the executive.

        ‘Your job shrinks before your eyes, you are further out on a limb, and then you are made redundant’ – the standard public sector manner of getting rid of unpleasantry. Always by management that cant be honest with itself, often the staff involved and is naturally secretive.

        The questions I would be asking are about foreign agents ….

        When did the payments to agents start?
        Who constructed that sales network?
        Who was responsible for ensuring that that network met contractual (to NPA, Securency or RBA) concerns? (let alone anti corruption and other corporations act concerns, UN sanction concerns)

        Corrupt Practices provisions (UK, EU and US) applies to any entity undertaking activities in their parts of the world, undertaking corrupt practices elsewhere. May impact RBA, would certainly apply to NPA and Securency. Company secretary references to stress etc could lay nice basis for constructive dismissal or compo claim.

        Freehills wouldn’t investigate claim – they would determine whether it could plausibly be determined that there was no claim – they would probably have been asked to provide that if possible.

        Project Delta – If individuals in Iraq were direct employees of RBA then they would be covered by any RBA Code of Conduct (May have changed significantly since then, but the one in existence then is likely to be more regimented and process driven, applying to Board and staff). If they were there under any direction then there is a delegated line of control apportioning responsibility for their presence there. If presence in Iraq is breach of international law then accountability would run through RBA (delegated) to Governor, Board, and Prime Minister.

        Not sure of Bethwaites position vis RBA Act, but even under corporations act (assuming NPA was incorporated) he could be pinged for approving action in contravention of UN sanctions.

        The nature of Bethwaites responsibility to report any activity to RBA (owner of NPA) would depend upon his contract/who it was with/instruction from NPA Board (and RBA appointees to it)/any articles linking NPA to RBA. He may not have had to report to RBA – this would be a logical fire break to shield upper reaches of RBA from unpleasantry. Could argue they have simply cocked up appointment of director for subordinate companies.

        The whole story ultimately as good a case study in why it is simpler to simply go to the press than try and follow some form of whistleblower checklist of procedures – because this is always about protecting management.

        Once issue has gone beyond RBA control there has certainly been focus on keeping things quiet. For ASIC not to conduct investigation there would presumably be file with reasoning why. There would also be file in Federal rollers on why handball to ASIC (though that seems logical) and it may be conceivable they could return to investigate if they thought there was case worth prosecuting. Senate committee has not seen fit to dig deeper – yet.

  11. AB says:
    You can start by investigating what happened and ensuring that the perpetrators are punished if they have broken the law.

    I say ” crucify them!”

  12. The worst of the story is that top RBA officials lied in front of a parliamentary commission. Do perjury laws apply there too? If yes, then it would mean 5 years in prison me thinks.

  13. PolarBearMEMBER

    One wonders if purpose of the secure fence surrounding the Securency and Note Printing Australia facilities is to keep all the corruption inside the fence.