A solid, hard-hitting AFR editorial today in response to the Treasurer's decision to take away control of RBA executive pay from its independent Board members. Not a good look for Australia's central bank:
"Remuneration for central bank officials is a sensitive issue. The Bank for International Settlements noted recently that mechanisms for deciding pay levels “need to be sufficiently independent to protect the governor and board members from potential political pressure”. The BIS warned that finance ministers, prevented by governance arrangements from directly influencing central bank decision-making, “may be tempted to exert clandestine pressure”. Mr Swan has stated many times the importance of central bank independence and that the Reserve Bank alone is responsible for setting monetary policy. But leaked diplomatic cables released last week by WikiLeaks show that the government was critical of the RBA for not cutting interest rates by more during the global financial crisis. Mr Swan did not reappoint to the RBA board Warwick McKibbin, a respected economist who criticised the government’s budget stimulus spending. While the Treasurer’s decision about how Reserve Bank salaries are set may not jeopardise the bank’s independence, the manner and timing of his decision are less than judicious and likely to be criticised as unwanted political interference."
