Wednesday, August 10, 2016

Glenn Stevens lauded for preserving RBA independence from government

When it comes to legacies, the outgoing Reserve Bank governor Glenn Stevens will be remembered for guiding Australia through the global financial crisis and marring his record with a the burden of a recession.

Mr Stevens - who makes his final public speech in Sydney today - also navigated Australia through a once in a century mining boom but also the unwanted legacy of a real estate bubble fuelled by cutting interest rates to a record low of 1.5 percent.

While the jury is out on the full Glenn Stevens time in the RBA hot seat, one respected economist has lauded Mr Stevens for preserving the independence of the Reserve Bank by raising interest rates a week before the 2007 election.

John Howard’s Coalition was swept from office, heralding the ascension of Labor’s Kevin Rudd as Prime Minister.

Saul Eslake, a former bank chief economist now vice chancellor’s  fellow at the University of Tasmania, said Mr Stevens came under immense political pressure from the Liberal Party after raising the cash rate by 0.25 percent to 6.75 percent.

"I think Glenn Stevens' courage in these circumstances is another key achievement of his time during the decade at the helm of the Reserve Bank," Mr Eslake told The World Today.

"There are many in the Coalition who never forgave Glenn Stevens for that even though I doubt that his decision to lift interest rates had any impact on the outcome of the 2007 election.

"There were a number of Coalition members who from time to time would surreptitiously briefed the (Canberra) Press Gallery against Glenn Stevens."

Mr Eslake also cited media pressure with The Daily Telegraph in Sydney describing Mr Stevens as "the most useless banker in Australia" because of his strategy of hiking interest rates.

Glenn Stevens' preservation of the Reserve Bank independence of government was most recently demonstrated when the RBA board cut the cash rate on May 3, overshadowing the Federal Budget.

Despite the plaudits as Mr Stevens prepares to retire on September 17, there is mounting criticism that continuous rate cuts since November 2011 have fuelled an investment housing bubble in the eastern seaboard, in particular in Sydney and Melbourne.

"That's something that critics of Glenn Stevens' time in office - and of Ian Macfarlane before him - will probably point to as an arguable blemishes on their records," Saul Eslake says.

"But I doubt that anyone could really say that Australia's economy would have been materially better of as a whole if the Reserve Bank had maintained higher interest rates."

Mr Eslake agrees however the younger Australians have been locked out of the main markets and live in the hope of receiving an inheritance or winning Lotto.

"Yes. Those are regrettable trends. And I think Glenn Stevens would be at one with in saying that the trend has been regrettable."

Glenn Stevens will deliver his final speech titled "An Accounting" when he speaks in Sydney at an event hosted by the Anika Foundation and Australian Business Economists