A pay increase of A$234,000 ($252,000) at the height of the global financial crisis made Reserve Bank of Australia Governor Glenn Stevens one of the world’s highly compensated central bankers.
The raise was agreed on by the bank’s board in October 2008 following a review by PricewaterhouseCoopers and the ending of performance bonuses, according to correspondence between the central bank and Treasurer’s office obtained by Bloomberg News under a Freedom of Information request.
Stevens’s 2010 total compensation was A$1.05 million, with an A$805,000 base salary that was 61 percent more than European Central Bank President Jean-Claude Trichet’s and four times that of Federal Reserve Chairman Ben S. Bernanke. Stevens was one of seven central bank chiefs from around the world to receive an ‘A’ grade in a September 2009 Global Finance Magazine survey for navigating their economies through the world’s worst financial crisis since the 1930s.
“Given the national significance of the governor’s position, the Board’s Remuneration Committee, and the board itself, discharges its responsibilities in this area in a disciplined manner,” Donald McGauchie, chairman of the remuneration committee and a member of the board until last month, wrote to Treasurer Wayne Swan explaining the decision.
Spokesmen in the Reserve Bank and Treasurer’s office declined to comment on the correspondence when contacted by Bloomberg News yesterday. Australian offices and markets are closed for the Easter holiday today.
Trichet was paid 367,863 euros ($537,300) last year, 2 percent more than his 2009 salary, according to the ECB’s annual accounts published in March. Bernanke earned $199,700, while Bank of Japan Governor Masaaki Shirakawa’s salary, at 34.4 million yen ($419,410) for the year to March 31, fell 1.5 percent from a year earlier.
Remuneration for Japan’s central bank governor has declined 10.8 percent over the past 10 years as the country grappled with deflation.
Stevens’s salary still trails that of Hong Kong Monetary Authority Chief Executive Norman Chan, who earned HK$7.5 million ($965,000), plus HK$868,000 in benefits last year, according to the HKMA’s annual report published yesterday.
Australia was one of the few economies to skirt the global recession as Stevens slashed the overnight cash rate target to a 50-year low of 3 percent. As the economy rebounded, he raised rates in seven quarter-percentage-point steps from October 2009 to November last year to 4.75 percent, the highest in the developed world.
The Reserve Bank forecasts Australia’s economy will expand 4.25 percent this year, driven by a mining investment boom and record job growth that helped spur the nation’s currency to the highest level since it was freely floated in 1983.
“The Australian economy overall has performed very well,” said Edwin Truman, a former director of the Fed’s international-finance division. “It was only mildly affected by the crisis.” The central bank “moved quite aggressively quite early in terms of liquidity support,” he said.
While central bank salaries “can be a political issue like everybody else’s in the financial sector,” the pay increase may be difficult to roll back for Stevens’ successors, said Truman, who’s now a senior fellow at the Peterson Institute for International Economics in Washington. “It’s hard for someone to say ‘I’m not worth that much,’” Truman said.
Stevens’s salary is more than double that of Prime Minister Julia Gillard’s base pay of A$355,264. In correspondence with McGauchie, Swan suggested the governor’s remuneration was too high.
In a letter dated Sept. 15, 2010, Swan said that in the future the Reserve Bank’s Remuneration Committee should “discharge its powers with an emphasis on ensuring that salaries are adjusted to be in line with community expectations of senior officials’ remuneration.”
Swan, in the letter, also said he was advised of the October 2008 decision to increase the governor’s salary in September 2009, “nearly one year after” the move.
The correspondence also included a letter to Swan from Jillian Broadbent, a central bank board member on the remuneration committee, expressing “serious concerns about the possibility that responsibility for the remuneration of senior officers of the Reserve Bank be moved away from the bank’s board.”
She said the current practice, adopted to address the acute staffing difficulties that the bank experienced in the 1980s as personnel were lured by higher-paying jobs in the finance industry, worked “very well” since it was established by then-Treasurer Paul Keating.
Under that framework, it recognized that the relevant comparisons for Reserve Bank remuneration aren’t mainstream government agencies but government business enterprises and other financial institutions.
“Attracting and retaining top financial talent into government in Sydney is a challenge,” she wrote in the letter dated Sept. 17, 2010. “Salary levels and the quality of the bank’s officers are interdependent.”
Swan, in a press conference earlier this month, said he understood community concern related to the governor’s salary, describing the issue as a “matter that’s before the government.”