Two of the candidates the government may choose to succeed Philip Lowe as governor of the Reserve Bank, according to Opposition Leader Peter Dutton, would not be able to function independently due to their established connections with the government.
That is a “silly” suggestion, according to a former Reserve Bank governor, and the future governor’s judgement and social conscience are much more crucial.
As rumours grow over whether the government will extend Mr. Lowe’s term or replace him when it ends in September, possibilities for the position of next RBA governor include Treasury Secretary Steven Kennedy and Finance Secretary Jenny Wilkinson.
But Mr. Dutton argued that the Treasury and Finance ministers should be disqualified from consideration.
“We can’t have a situation where the government is appointing somebody who is familiar to the government, in the sense that they have worked very closely with ministers, or the treasurer, or the finance minister,” Mr. Dutton said.
“We cannot have a high government job filled by a member of the Labour Party or even the Coalition. It must be a person who is impartial and prioritises the needs of the Australian people.
Senior Coalition lawmakers, including Shadow Finance Minister Jane Hume, have endorsed extending Mr. Lowe’s tenure, stating that he has handled a challenging position well.
Mr. Dutton’s plan was rejected by former governor Bernie Fraser, who was chosen by Treasury directly in 1989 and held the position for seven years.
The most important factor is that the person chosen has excellent judgement. A person with experience in economic issues and a social conscience is needed to make decisions as the bank governor, according to Mr. Fraser.
“I don’t really think it matters whether they come from the public service or whatever; someone from the Treasury or Finance would have a pretty solid handle on fiscal policy, which must closely coordinate with monetary policy.
“Ruling it out is foolish,”
The Reserve Bank is now undergoing reform to increase its independence from all forms of government interference.
Although it has never been employed, the government still has the authority to overturn RBA judgements; nevertheless, the reforms would do away with that authority.
Ministers have refrained from publicly commenting on the Reserve Bank’s decision to raise interest rates 12 times since May of last year, and they have supported Mr Lowe as he has faced harsh criticism for predictions he made in 2021 that interest rates would not start to climb until the middle of 2024.
Chris Bowen, a cabinet minister, deemed Mr. Dutton’s remarks offensive.
“I’m not going to speculate on the nomination of the RBA governor, but it’s an insult to departmental staff. Mr. Dutton ought to recognise that the RBA governor in office at any given moment will act with the same rigour and independence as the other governors, according to Mr. Bowen.
Although the majority of RBA governors have worked for the bank for their whole or a large portion of their careers, choosing a governor from the Treasury is not unusual.
Since central banking was separated from the Commonwealth Bank in 1959, there have been eight Reserve Bank governors.
