SYDNEY: The winner of Australia's election on Saturday, Aug 21 will have the rare opportunity to re-shape the leadership of the central bank, with almost the entire board coming up for reappointment in the next three years.
The terms of eight of the nine Reserve Bank of Australia (RBA) board members, including the governor, expire between December and late 2013, leading to talk that the next government could be tempted to pick ideological allies for the posts.
Neither side of politics have commented on such a sensitive topic, but the make-up of the next RBA board is arguably more important to the economy than the make-up of the next cabinet and different governments can make different appointments.
"The governor is the job that really matters and it's not too hard to think that the choice might be different, depending on what political stripe the government was," said Rory Robertson, an interest rate strategist at Macquarie Bank.
The centre-left Labor government is locked in a tough electoral struggle with the conservative opposition, with opinion polls pointing toward a cliff-hanger result at the weekend.
In practice, the central bank's independence is now so firmly entrenched amongst the public and so prized by investors that only the most foolhardy Treasurer would risk the markets' ire with an appointment that was considered blatantly "political".
"There would be an uproar if there was even the slightest suggestion of political bias in the choices," said Rob Henderson, head of markets economics at National Australia Bank.
"The government's economic credibility would be called into doubt, and both parties value that very highly."
The first term of the current governor, Glenn Stevens, ends in September 2013, just within the life of the next three-year parliament.
Henderson felt Stevens would be certain to be re-appointed for a second seven-year term, assuming he wanted it.
The career central banker has been credited with helping Australia avoid recession during the global financial crisis, cutting interest rates by a massive 4 percentage points between September 2008 and April 2009.
The RBA is also assumed to be grooming successors in-house, notably the head of its economics unit, Philip Lowe, and the head of the markets division, Guy Debelle.
"It would be a kick in the guts for the RBA if they offered such well-qualified candidates and the government turned them down for their own pick," said Henderson.
The RBA's board is unusual in its make-up. It is chaired by the governor, with his deputy as deputy chairman, who both serve terms of up to seven years and they can be reappointed.
The Treasury department secretary, who is a top civil servant, serves as a permanent member. And there are six external members who tend to be drawn from business and academia. They serve for five-year terms and can be reappointed.
The term of the deputy governor Ric Battellino ends in February 2012, so the choice is still some way away.
But the first board choice comes a lot sooner, when the term of external member Robert Corbett ends on Dec 1. He has served one term and would be expected to be reappointed if he desires.
The RBA's hand was strengthened by the present Labor government. In 2007, it raised the statutory independence of the governor and deputy governor, so that they could only be dismissed with the approval of each house of the parliament.
Then prime minister Kevin Rudd also established a register of "eminent candidates of the highest integrity" from which the Treasurer would make new appointments to the RBA board.
This register is maintained by the RBA and the Treasury secretary, though the names on it are not made public.
As Rudd said at the time: "This procedure removes the potential for political considerations in the appointment process and ensures only the best qualified candidates are appointed to the Reserve Bank board."
This step followed a controversy in 2005 when external board member Robert Gerard resigned amid questions about a 14-year dispute between his family's business, Gerard Industries, and the Australian Taxation Office. The then Labor opposition had charged that Gerard's original appointment to the board in 2003 was politically motivated, citing Gerard's donations to the Liberal Party.
"I think you can be confident that any choice for the board will be of high quality," said Robertson at Macquarie. ' Reuters
The terms of eight of the nine Reserve Bank of Australia (RBA) board members, including the governor, expire between December and late 2013, leading to talk that the next government could be tempted to pick ideological allies for the posts.
Neither side of politics have commented on such a sensitive topic, but the make-up of the next RBA board is arguably more important to the economy than the make-up of the next cabinet and different governments can make different appointments.
"The governor is the job that really matters and it's not too hard to think that the choice might be different, depending on what political stripe the government was," said Rory Robertson, an interest rate strategist at Macquarie Bank.
The centre-left Labor government is locked in a tough electoral struggle with the conservative opposition, with opinion polls pointing toward a cliff-hanger result at the weekend.
In practice, the central bank's independence is now so firmly entrenched amongst the public and so prized by investors that only the most foolhardy Treasurer would risk the markets' ire with an appointment that was considered blatantly "political".
"There would be an uproar if there was even the slightest suggestion of political bias in the choices," said Rob Henderson, head of markets economics at National Australia Bank.
"The government's economic credibility would be called into doubt, and both parties value that very highly."
The first term of the current governor, Glenn Stevens, ends in September 2013, just within the life of the next three-year parliament.
Henderson felt Stevens would be certain to be re-appointed for a second seven-year term, assuming he wanted it.
The career central banker has been credited with helping Australia avoid recession during the global financial crisis, cutting interest rates by a massive 4 percentage points between September 2008 and April 2009.
The RBA is also assumed to be grooming successors in-house, notably the head of its economics unit, Philip Lowe, and the head of the markets division, Guy Debelle.
"It would be a kick in the guts for the RBA if they offered such well-qualified candidates and the government turned them down for their own pick," said Henderson.
The RBA's board is unusual in its make-up. It is chaired by the governor, with his deputy as deputy chairman, who both serve terms of up to seven years and they can be reappointed.
The Treasury department secretary, who is a top civil servant, serves as a permanent member. And there are six external members who tend to be drawn from business and academia. They serve for five-year terms and can be reappointed.
The term of the deputy governor Ric Battellino ends in February 2012, so the choice is still some way away.
But the first board choice comes a lot sooner, when the term of external member Robert Corbett ends on Dec 1. He has served one term and would be expected to be reappointed if he desires.
The RBA's hand was strengthened by the present Labor government. In 2007, it raised the statutory independence of the governor and deputy governor, so that they could only be dismissed with the approval of each house of the parliament.
Then prime minister Kevin Rudd also established a register of "eminent candidates of the highest integrity" from which the Treasurer would make new appointments to the RBA board.
This register is maintained by the RBA and the Treasury secretary, though the names on it are not made public.
As Rudd said at the time: "This procedure removes the potential for political considerations in the appointment process and ensures only the best qualified candidates are appointed to the Reserve Bank board."
This step followed a controversy in 2005 when external board member Robert Gerard resigned amid questions about a 14-year dispute between his family's business, Gerard Industries, and the Australian Taxation Office. The then Labor opposition had charged that Gerard's original appointment to the board in 2003 was politically motivated, citing Gerard's donations to the Liberal Party.
"I think you can be confident that any choice for the board will be of high quality," said Robertson at Macquarie. ' Reuters
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