One of John Howard’s and Peter Costello’s biggest boasts was Reserve Bank independence.

With the Reserve Bank Board now releasing minutes of its meetings, it might be time to revisit some comments Crikey carried after the December meeting in 2005, when the Rob Gerard affair was still fresh in people’s minds:

The lesson from this week seems to be that the Government only listens to the advice it wants to hear, and that Peter Costello’s policy making is an analysis free zone. A subscriber has tied the Treasurer’s latest contretemps into the Rob Gerard fiasco:

I would like to pick up on the RBA governors’ approval of the appointment process for board members. I think the media should ask the question – why would he approve of such a process? The answer is that it benefits the Governor and Deputy Governor to have the board structure and a bunch of people on the board who are unable to scrutinise their advice. If on the other hand, we had board structures like that of the Fed and the Bank of England, where most if not all members of the governing board have some form of professional economic training, then the RBA analysis would face a lot more scrutiny and make the jobs of the governor and deputy governor that much harder.

Members of the US Board of Governors not only have professional economic training, but also have a dedicated professional staff that can question the analysis in board papers etc – they think about policy full time. Only the treasury secretary is in a position to question the RBA’s advice, and does, because he has a staff that has access to all, if not more, information that the RBA has access to. The rest of the board has to take the RBA advice and are not in any position to credibly question the advice. Rarely do board members request analysis from RBA staff, often this is done via the governor who can filter whatever analysis is given to the board member – this is done by slanting the analysis to suit whatever message the governor wants board members to hear and is also “dumbed down” so that the board members can understand. It is in the best interests of the executives of the RBA to maintain the status quo.

It is also interesting that the Treasurer was able to comment on the contribution of Robert Gerard to the RBA board. My question is how would he know how board members contribute to the decision making process for monetary policy? Do they ask insightful questions, do they ask questions that the RBA staff have not considered and do they actually add anything to the continuing monetary policy debate? Well the public can never know because the Treasurer refuses to publish RBA board minutes – what is he afraid of? All the RBA needs to print is “One board member commented that…”, “Another board member questioned whether….” without identifying who said what – see the Bank of England minutes. It seems that Australia is willing to adopt many practices from overseas, but central bank transparency is not one of them. The public (including RBA insiders) do not even know if the RBA board takes a vote – yet we know the B of E and the Fed boards both do.

I think it is worth questioning whether the Treasurer or the RBA are reluctant to publish minutes. The common perception is that the RBA has been blocking this innovation….but I think this is a misconception. I would not be surprised if the RBA has been preparing publishable minutes but that a certain minister does not want these in the public domain. Does this sound like independence to you?

Interestingly, this morning’s RBA release reads: “For some months, the Reserve Bank Board has been reviewing its communication practices. As a result of that process, the Board has now decided on the following changes.”

“For some months.” So why change now? What else has changed? Why… the government!