Additional Remarks: Senator Andrew Murray
The Reserve Bank Amendment (Enhanced Independence)
Bill 2008 (the Bill) is a modest bill that does not do much. It marginally
increases the independence of the appointment process by going one step further
from the present process of the Treasurer appointing the Governor of the
Reserve Bank of Australia (RBA) after the approval of the Cabinet, to ensuring
that the Governor-General, on the advice of the Cabinet, appoints the Governor
of the Reserve Bank.
The Bill amends the Reserve Bank Act 1959 (the Act)
so that the Governor-General in Council will appoint the Governor and Deputy
Governor of the Reserve Bank. The Bill does not change the appointment process
for the Reserve Bank Board, which remains with the Treasurer.
In s25 (8) the Bill amends the Act so that the termination
of the appointment of the Governor or Deputy Governor would be by the
Governor-General in Council following Parliamentary approval. This replaces
section 25 of the Act which entrusts this task to the Treasurer. The Bill
specifies three grounds for the termination of an appointment; where a Governor
or Deputy Governor:
- becomes permanently incapable
of performing his or her duties; or
- engages in any paid
employment outside the duties of his or her office; or
- becomes bankrupt, applies to
take the benefit of any law for the relief of bankrupt or insolvent
debtors, compounds with his or her creditors or makes an assignment of his
or her salary for their benefit.
The Government have missed an opportunity to review this
fifty-year old Act, including governance matters, to bring Australia’s central
bank legislation up to date with international and domestic law. The present
system needs modernising, and the Bill is not sufficiently comprehensive. I
will only deal with appointment and dismissal issues below.
The Board
Dealing just with appointment and dismissal, by far the
greatest criticism in the last decade or two has been with reference to the
RBA’s Board – its composition, skills set, and function. That is not to say there
have not been good appointments to the Board, but not all Board members pass
the ‘excellence’ test.
The Democrats are concerned that whenever appointments are
made to institutions set up by legislation, independent statutory authorities
or quasi-government agencies, the processes by which these appointments are
made should be, and be seen to be, transparent, accountable, open and honest.
It is still the case that appointments made to public authorities are left
largely to the discretion of ministers with the relevant portfolio
responsibility.
It is important that the public have confidence that
appointments by the Executive are made against core principles of merit,
probity and transparency. Instead there is a widespread perception that
Government appointments made through a secret process against unknown criteria,
at the discretion of the Minister or the Cabinet, can and do result in partisan
patronage.
A main failing of the present system is that there is no
legislation which sets out a standard process to regulate the procedures for
making appointments to statutory authorities and other agencies. Perhaps more
importantly, there is no external scrutiny or analysis by an independent body
of the procedure and merits of appointments. This entrenches the public
perception of ‘jobs for the boys’.
The issue of appointments on merit was comprehensively
examined by the Nolan Committee appointed by the United Kingdom Parliament in
1995. It set out the following principles to guide and inform the making of
such appointments:
- A Minister should not be involved in an appointment where
he or she has a financial or personal interest;
- Ministers must act within the law, including the
safeguards against discrimination on grounds of gender or race;
- All public appointments should be governed by the
overriding principle of appointment on merit;
- Except in limited circumstances, political affiliation
should not be a criterion for appointment;
- Selection on merit should take account of the need to
appoint boards which include a balance of skills and backgrounds;
- The basis on which members are appointed and how they are
expected to fulfil their roles should be explicit; and
- The range of skills and backgrounds which are sought
should be clearly specified.
The UK Government fully accepted the Committee’s
recommendations. The Office of Commissioner for Public Appointments was
subsequently created (with a similar level of independence from the Government
as the Auditor General) to provide an effective avenue of external scrutiny.
UK Prime Minister Brown has announced that even better
scrutiny will be introduced for appointments in particular areas, including
involving Parliament’s select committees in the appointment of key officials.
For the health and integrity of Australian democracy, the
public must have trust and confidence that the Government will not allow
improper or irrelevant considerations, political interest or political
obligation, to influence public appointments.
The Governor
The removal/replacement of the Governor of the RBA can be
looked at from an objective and subjective basis. Objective issues are those
that rest on fact not opinion, and subjective issues are those that rest on
opinion not fact.
I agree with the Coalition that dismissal should be
mandatory for bankruptcy. As is illustrated below, I believe the Board should
have a greater role than it does at present.
Objective
Objective issues are those that rest on fact not opinion -
death, resignation, bankruptcy, physical incapacity, mental incapacity, and outside
employment. These should exclude any involvement of the G-G, the Executive or
the Parliament.
For me a 'clean' approach to these issues could be as
follows:
- Death - the Deputy Governor of the RBA steps in,
the Board approves final settlement of terminated employment, and the
appointment of the successor Governor is as per the Act.
- Resignation - the Deputy Governor of the RBA steps
in, the Board approves final settlement of terminated employment, and the
appointment of the successor Governor is as per the Act.
- Bankruptcy - the Board must suspend the Governor as
soon as bankruptcy proceedings begin and the Deputy Governor of the RBA
stands in. If the bankruptcy is confirmed, then the Governor is
automatically dismissed, the Deputy Governor of the RBA stands in, the
Board approves final settlement of terminated employment, and the
appointment of the successor Governor is as per the Act.
- Physical incapacity - on being incapacitated, the
Deputy Governor of the RBA steps in. Subsequently, on objective
independent medical opinion, the Board can decide that the Governor can
not be expected to recover sufficiently or quickly enough to fulfil the
Governor's duties, the Deputy Governor of the RBA stands in, the Board
approves final settlement of terminated employment, and the appointment of
the successor Governor is as per the Act.
- Mental incapacity - on being incapacitated, the
Deputy Governor of the RBA steps in. Subsequently, on objective
independent medical opinion, the Board can decide that the Governor can
not be expected to recover sufficiently or quickly enough to fulfil the
Governor's duties, the Deputy Governor of the RBA stands in, the Board
approves final settlement of terminated. employment, and the appointment
of the successor Governor is as per the Act.
- Outside employment – the Governor should be
prohibited from outside employment, but not from receiving payments (such
as royalties from book sales). All grey areas should be determined by the
Board. The Board can decide that the Governor must be dismissed on
‘outside employment’ grounds, the Deputy Governor of the RBA stands in,
the Board approves final settlement of terminated employment, and the
appointment of the successor Governor is as per the Act.
Subjective
Subjective issues are those that rest on opinion not fact -
namely, performance, or misconduct/misbehaviour.
The approach should be:
- Board - a Governor who loses the confidence of the
Board must go. The Deputy Governor of the RBA steps in, the Board
approves final settlement of terminated employment, and the appointment of
the successor Governor is as per the Act.
- Executive - a Governor who loses the confidence of
the Executive should have the matter referred by the Executive to the
Parliament, and have his/her future decided by the Parliament. While that
process is under way, the Deputy Governor steps in. If termination is
recommended by the Parliament, the Deputy Governor of the RBA stands in,
the Board approves final settlement of terminated employment, and the
appointment of the successor Governor is as per the Act. (In practice I
cannot see any Governor being willing to go through this and I am sure
they would resign).
- Parliament - a Governor who loses the confidence of
the Parliament must go. While that process is under way, the Deputy
Governor steps in. If termination is recommended by the Parliament, the
Deputy Governor of the RBA stands in, the Board approves final settlement
of terminated employment, and the appointment of the successor Governor is
as per the Act. (In practice I cannot see any Governor being willing to
go through this and I am sure they would resign).
I would keep the Courts out of all these matters if
possible.
The Bill should be amended in at least one respect - to keep
bankruptcy a mandated ground for dismissal.
Senator Andrew Murray
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