It was only after the limited attention granted to the Reserve Bank’s Glenn Stevens at this week’s economic summit in Brisbane that it finally became obvious the governor is talking too much: There was a time, not long ago, when we hung on every word the RBA boss said … no longer.
The Brisbane summit was Stevens’ second speech in a week – he spoke in Adelaide on June 8. But the more he talks in public the less authority he has. And in case you think it’s perfectly conventional for a central banker to wander the land giving speeches on everything from productivity to the payments system, it is not. Last calendar year, Stevens made 17 speeches, that’s more than double the seven speeches his predecessor Ian Macfarlane gave when he was in the same office a decade ago.
What is more, Stevens would appear to be well out of line with his international peers. Taking just two relevant examples: Mervyn King, governor at the Bank of England, presented five speeches last year, the governor of the Reserve Bank of New Zealand Alan Bollard did six — so Stevens has done more than the two of them put together.
Does it matter? Absolutely. The RBA governor is arguably the second most important post in the land after the Prime Minister. His public comments should underpin stability in the financial system: stability in turn translates into business confidence. Just now, according to a NAB survey, business confidence is at a three-year low.
The truth is that the RBA is struggling to have its voice heard. The radical and successful decision by Mike Smith, chief executive at ANZ, to introduce an independent cycle of interest rate announcements has materially damaged our central bank’s ability to influence interest rate settings among commercial banks. Additionally, more commonplace issues such as rumours of divisions at board level, negative responses to unpredictable movements in cash rates or indeed the common sin of overestimating growth and inflation, have an extra sting when the office of the governor shows any signs of losing relevance.
But RBA relevance will not be regained with the overexposure of its governor.
The original strategy unleashed by Stevens when he took the job to “open up” the RBA was well intentioned — perhaps the bank in the past needed to explain key policy decisions more effectively — but the strategy has now been overcooked.
Australia is, according to Moody’s Investor Services, one of the strongest economies in the world, we just had our triple A rating re-affirmed. But leadership and confidence are scarce.
Speak less, governor … it will mean more.
*This article was first published at Business Spectator
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