ABC RADIO MELBOURNE DRIVE WITH ALI MOORE
MONDAY, 27 NOVEMBER 2023
SUBJECTS: Reform of the RBA; Appointment of a new Deputy Governor of the RBA; Dismissal of Mike Pezzullo.
ALI MOORE: You'll know that review into the Bank's operations that happened earlier this year and it's led to legislation that's now being introduced to Federal Parliament. The legislation is going to create a new board that's going to have the sole job of setting interest rates and the reforms are also going to remove a little known mechanism that allows the government to overrule the Reserve Bank. Also, the Government has announced today the new Deputy Governor of the Reserve Bank, a central banker who is going to come from the UK. Andrew Leigh is Assistant Minister for competition, Charities and Treasury. Andrew Leigh welcome to Drive.
ASSISTANT MINSTER FOR CHARITIES, COMPETITION, TREASURY AND EMPLOYMENT ANDREW LEIGH: Thanks, Ali. Great to be with you and your listeners.
MOORE: As a key part of the Government. I also want to ask you about the sacking of the former Home affairs boss, Mike Pezzullo. But first of all, the RBA legislation, what exactly is the veto power currently in the RBA Act and why was it put there?
LEIGH: Well, I'm not sure of its history, Ali but it's never been used and we don't anticipate circumstances in which it would be used. What we’re doing is to entrench confidence in the central bank as an independent actor by removing that veto power. If you’re not going to use it, if the markets and the rest of the broader international community are looking to this Reserve Bank as having an independent role, then it's useful to clarify that independence by removing the unused veto power.
MOORE: Does it not, though, provide a sort of in your back pocket level of accountability that you don't get when you've got bureaucrats making decisions, as you have at the RBA? They're not elected officials.
LEIGH: Look, break glass options can be useful if you're planning to use them. But if you're not, then it just creates a risk that there's going to be unnecessary smashing going on. In this case, it shores up the already strong independence of the Reserve Bank of Australia to take that veto power out. Essentially, it's modernising the legislation, Ali, in line with the way in which practice has evolved with both sides of Parliament.
MOORE: As you know, though, black swan events do happen. Is there any way, once this veto power is removed, that the government could step in and control the central bank?
LEIGH: Well, the central bank has control over monetary policy. The government has control over fiscal policy. That's the way our system has worked for decades. This simply entrenches that divide. That doesn't mean the government can't do a lot over cost of living. You've already seen our responsible, targeted cost-of-living measures, which, according to Reserve Bank's assessment, have taken half a percentage point off inflation. But we leave it to the Reserve Bank to take care of monetary policy just as the Reserve Bank leaves it to the government to take care of fiscal policy.
MOORE: New deputy Governor, Andrew Hauser, who's from the UK. He'll now be number two in the Bank after Michele Bullock. Why a foreigner? What does he bring?
LEIGH: He brings international expertise and one of the things that the Reserve Bank Review noted was the value of dovetailing into the work that's being done globally. So, he'll bring insights in from the Bank of England and he's spent some 30 years in the bank of England. So, those connections will be useful. If they’re looking for a head for a commercial bank in Australia, typically they'll do a global search and so it's appropriate that when we're looking for someone to serve at the senior levels of the Reserve Bank, we do a similarly global search. He comes well recommended with good academic credentials. He served as a member of the Executive Board of the International Monetary Fund in Washington DC. So, he's somebody who has really deep roots into the central banking community.
MOORE: And was that quite a deliberate thing once Michele Bullock's appointment was decided? Because she's come from within the Bank, that you really did need someone from way outside the Bank?
LEIGH: I think it provides a useful balance to the Bank. Obviously, Michele Bullock has strong knowledge of the Reserve Bank after her decades in the institution. Andrew Hauser brings an international perspective and then of course, we'll be setting up a Monetary Policy Board alongside the Governance Board that'll provide fresh opportunities for bringing new perspectives in. The Reserve Bank Review was all about strengthening a key Australian institution, Ali. No one was ever suggesting that the Reserve Bank was broken, but many people were suggesting that its work could be strengthened by modernising in line with how other global central banks operate.
MOORE: And the two boards, the one for monetary policy, the other for governance, in terms of me and possibly even you, are we actually going to notice any real difference?
LEIGH: What you'll see in a ‘business as usual’ case is not much change. These arrangements can be useful, though, in a crisis. So, in a crisis, you'll have people around the monetary policy board table who are monetary policy experts, who are able to challenge the decisions of the Reserve Bank, who understand the methodologies. And then on the governance side, you'll have people who are absolute governance experts, who are brought in because of their expertise on managing large organisations, and again, are able to challenge the decisions of managers in terms of how the Reserve Bank is being run. Those two functions are separate in many other central banks, that system is acknowledged to be world's best practise. That's why we're moving the Reserve Bank towards it.
MOORE: Can I ask you about Mike Pezzullo, one of the most powerful figures in the public service before he was stood down while an independent investigation was held. He's been sacked over leaked conversations, which pretty much laid bare his attempts to influence the government. Is it not of concern that if those conversations had never seen the light of day, courtesy of a leak and some journalists, he'd still be running home affairs?
LEIGH: Who's to know when we speculate on those things, Ali? What we do know is we've had an independent inquiry. It found breaches the Australian Public Service Code of Conduct. Mike Pezzullo fully cooperated with the inquiry. And the Prime Minister has decided to stand him aside today.
MOORE: The correct move, in your view?
LEIGH: Absolutely. It follows the public service code of conduct. We have a great public service, Ali and one of the reasons why we do that is because it abides by a code of conduct. We saw under the former government all kinds of shenanigans in terms of removing heads of agencies for capricious reasons which had nothing to do with their performance. What we're seeing here is an independent review which goes to the merits of a senior public servant. He has been stood aside on a merit based process, not simply because he didn't get on with his Minister.
MOORE: At the same time, though, you say he abides by the Public Service Code. How do you know? I mean, I go back to the point that here is one of the most senior public servants, who we would have been none the wiser if there hadn't been a leak. Does it mean cause for concern about what else might be happening? Do you think he was absolutely an outlier? There wouldn't be anyone who would be potentially doing the wrong thing that we just don't know about?
LEIGH: Well, I think this is the process working as intended, Ali. We had an independent inquiry run by Lynelle Briggs making a recommendation to the Secretary of the Department of Prime Minister and Cabinet.
MOORE: But is that the process working as it should, given that you didn't know about it until it was leaked?
LEIGH: Well, that'll be true of all kinds of different investigations, that the investigation doesn't proceed until the information comes to light. But we now have a National Anti-Corruption Commission. It's opened its doors on the 1st of July, people can make referrals to the National Anti-Corruption Commission if they believe there is evidence of misconduct among public servants. So, we're strengthening those governance mechanisms while recognising that the Australian Public Service has been run down under nine years of a Coalition Government that was constantly attacking independent public servants. I represent the ACT, so many of my constituents are current or former public servants. I know how hard the public service works and how much it cherishes its independence from government and its important role in our system.
MOORE: Andrew Leigh just a final question, will Mike Pezzullo, as far as you know, will he face legal action?
LEIGH: I haven't got any information to share with you either way.
MOORE: Should he for breaches of the Public Service Act?
LEIGH: If anyone has broken the law, then there should be consequences that ought to apply to Mike Pezzullo, as it would to you, me or any of your listeners.
MOORE: Andrew Leigh, many thanks for joining us.
LEIGH: Thanks so much, Ali.
MOORE: Andrew Leigh there, Assistant Minister for Competition, Charities and Treasury.