RBA Pay Power Should Shift to Outside Panel, Gillard Ally Says
Australia’s central bank should cede control of senior officials’ pay, a member of Prime Minister Julia Gillard’s ruling coalition said, intensifying a debate over Governor Glenn Stevens’s A$1.05 million ($1.1 million) package.
Bob Brown, whose Greens party allows Gillard to stay in office and will hold the balance of power in the Senate starting in July, said the pay of top Reserve Bank executives needs to be set by the same panel that decides compensation for judges and other officials.
“That would ensure the proper checks and balances are in place and would not reduce the central bank’s independence,” Brown said in a statement issued to Bloomberg News in the capital, Canberra.
The dispute pits some lawmakers against a central bank that’s trying to retain public servants in a nation with the world’s sixth-highest gross domestic product per capita. The average compensation of chief executive officers of Australia’s four biggest banks in the most recent fiscal year was A$11 million. The average full-time worker makes about A$67,000 a year.
Roger Corbett, chairman of Fairfax Media Ltd. (FXJ) who heads the RBA’s compensation committee, was traveling and couldn’t be reached for comment, according to his office. A spokesman for the central bank declined to comment.
Treasurer Wayne Swan in September urged the RBA compensation committee to “discharge its powers with an emphasis on ensuring that salaries are adjusted to be in line with community expectations of senior officials’ remuneration,” according to correspondence between the central bank and the Treasurer’s office obtained under a Freedom of Information Act request.
Swan’s rebuke was a response to a A$234,000 pay raise granted to Stevens in October 2008, a month after the collapse of Lehman Brothers Holdings Inc., making his base pay in 2010 more than what the heads of the European Central Bank and U.S. Federal Reserve made combined.
Barnaby Joyce, Senate leader for the junior opposition coalition partner The Nationals that mainly represents rural areas, defended Stevens’s salary. While such income “would seem incredible to many Australians, the reality is that it’s probably not compared to what he could get somewhere else -- at commercial banks.”
Independent lawmaker Bob Katter, whose district in northern Queensland is almost the size of Texas, said the 2008 salary increase was “nothing short of outrageous” and Stevens’s pay should be decided by the country’s Remuneration Tribunal.
“It is a public-service position,” Katter said in an interview in Canberra. “The RBA governor is not worth 20 times the average wage.”
Former RBA officials have sought to counter the move to strip the institution of its pay-setting authority, saying it might shrink the talent pool for recruiting.
Donald McGauchie, who headed the RBA compensation committee until March, said in an interview last month that the disparity between Stevens and his global peers was explained by the belief that an RBA governor wouldn’t be able to command the same income as his global central bank peers after leaving the post.
Former RBA Governor Bernie Fraser said last week the burden carried by the head of the central bank justifies Stevens’s salary.
“You are making a decision that affects everyone in the country,” Fraser said in a May 19 interview. “It’s the level of responsibility that weighs on you.”
Australia’s pay tribunal is an independent authority with three members and determines, reports on or provides advice about remuneration, including allowances and entitlements that are within its jurisdiction for federal lawmakers, judicial and non-judicial offices of federal courts and tribunals and others.
South Australian Senator Nick Xenophon, one of seven upper house lawmakers needed to pass laws until July, said he backed the tribunal to set Stevens’s compensation. “You are talking about a hybrid of a senior public servant and a corporate high- flier and the tribunal needs to have extra resources to deal with his and senior salaries in the bank,” Xenophon said in an interview.
Stevens was one of seven central bank chiefs to receive an ‘A’ grade in a September 2009 Global Finance Magazine survey for navigating their economies through the world economy’s worst postwar recession.
Australia was one among the few developed countries to skirt the global recession as Stevens slashed the overnight cash-rate target to a 50-year low of 3 percent and the country benefited from sustained Chinese demand for its exports. As the economy rebounded, he raised interest rates in seven quarter- point steps from October 2009 to November last year.
The RBA governorship isn’t “the same as other positions,” Joyce said. “It’s one of the top positions and hand in glove with that if he gets his job wrong he deserves all the pillorying that comes with the fact that he’s a highly paid executive. If he gets his job right, we’re all better off.”
Gillard’s minority Labor government needs the support of four non-party lawmakers to pass laws after the August 2010 election delivered the closest result in 70 years. Greens lawmaker Adam Bandt along with independents Tony Windsor, Rob Oakeshott and Andrew Wilkie pledged their support to enable Labor to govern.
Beginning July 1, when the new Senate term starts, the Greens will have the balance of power in the nation’s upper house, with enough of its own senators to side with Labor to pass laws or team with the opposition to defeat them.
Oakeshott said that ensuring “the best talent outcome for the most important financial institution” in the country was the key issue.
“I am completely unconvinced as to why we need to change anything,” he said. “The Reserve Bank has been doing a good, independent job in protecting our economy. Why mess with it?”
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