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 a total of 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 both 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.

More from Business Spectator


Please login or register to post comments

Comments Policy »
The idea that public policy is improved by decision makers providing less information about their decisions and fewer opportunities for discussion is odd (Time to muzzle the RBA? June 15).
Considering their performance, using other central banks as a guide as to appropriate behaviour is also unwise.
As for interest rates, the RBA is losing traction simply because it is driving down rates in the direction of ZIRP and encountering limits as local banks compete for deposits.
Perhaps if we stopped expecting the impossible from the RBA and monetary policy and started to demand economic reform from our politicians we would be less concerned that the RBA is unable to leap tall buildings in a single bound.
Very interesting thoughts James (Time to muzzle the RBA? June 15).
I like the RBA governor very much, but you have a point.
In my opinion:
1. many in business want one to talk things up (including Gillard and Swan); economic conditions are not allowing for that;
2. What Governor Stevens is trying to do is convey reality into unwanted exuberance;
3. I believe there are big "structural changes" happening, simply due to a failure world-wide of governments led by Greenspan to apply monetary policy with due care;
4. We in commerce and business believe that being in business is a bed of roses, whereas no one or very few had quarantined themselves and their businesses for tough times;
5. Look at what the exuberance has done in Europe/US. There appear to be billions and billions of dollars of finance capital tied up in dead property development projects; that has got to be worked through;
6. Governments have absorbed private sector debt;
7. Banks/governments are holders of this “debt” and other debt or are insolvent;
8. Government behaviour has not changed; and neither has the big finance houses – eg. JP Morgan's by way of example;
9. Governments continue to pump prime residential eg. NSW with public money rather than letting market operate;
10. where is micro-economic reform so sorely needed for SME sector?
The key area to pull countries (and big business)s out of this mess is SMEs. But it has been abused; Government continue to disregard us. We see new areas of opportunity far faster and quicker than big business.
But who the hell wants to put up risk capital when all we have is people believing that all one must do is "talk up" an economy?
But sweet bugger all. Excuse the French. My patience has run very thin on promises, promises, promises. Bureaucratic stuff-up, upon stuff-up, upon stuff-up. And are allowed to. And the sacred cows don’t get fired. Whereas in business one can lose it all!
So grandfather Stevens I feel is doing a good job. But you have a point.
Got to be concerned when Mr Stevens talks up the benefits of a high Aussie dollar (Time to muzzle the RBA? June 15).'s not just the high dollar holding us back (we'd benefit from a better productivity to wage ratio for one)...but even blind Freddie can see that the high dollar is sending jobs (and business) overseas.
Seriously, with the dramatic structural changes occurring in the Australian economy I would be more concerned if the governor of the RBA had little to say; the relative scale of these changes in Australia is enormous compared to some of the European basket-cases (Time to muzzle the RBA? June 15). And as for using any European agency as a relevant model for comparison ... we'll get back to you James.
I think Glenn thinks too much of his own importance because of how much he gets paid (Time to muzzle the RBA? June 15). More than the US Fed gov! Maybe he should talk about what an outrageous drain on taxpayers his salary is and how this cronyism is undermining productivity.
If ever this country needed a voice of reason on economic matters it is now (Time to muzzle the RBA? June 15). We are the wonder of the world. Thanks to good leadership and a bit of luck we have come through and are sailing through the global economic turmoil relatively unscathed. Yet largely thanks to the madness of Abbott and co we are the most miserable people in the world. Someone needs to highlight the truth. It can't be Gillard and co because no one believes anything they say. Stevens and others as well should speak up. Unfortunately many of the "others" have vested interests in government change. Its a perverse situation.
I think the problem you have in the Governor of the RBA talking is he is spoiling your publication's pitch and that the Australian economy is doing well and that means Labor is running the economy well (Time to muzzle the RBA? June 15).
This is the first time I have heard that anyone loses authority by talking more than once a week.
Maybe your publication should be a monthly or annual? How daft.
Confidence is low because the Liberal party and sections of the media persist in saying that Australians are doing it tough (Time to muzzle the RBA? June 15). Perhaps this is why Glenn Stevens feels he has to try and counter this negativity and bring some perspective to the debate.
Advising an important person to gain greater respect by keeping his opinions largely to himself, is like saying a woman is more alluring when she hides her face behind a veil (Time to muzzle the RBA? June 15). There's some truth in both, but they're not attractive ones we particularly want to foster. Openness always has it's problems, but on balance the alternative is worse.
James, there is nothing wrong to speak often and the governor is doing the right thing – and I hope he is not subdued by the Labor govt to pressure him in reducing rates further (Time to muzzle the RBA? June 15). Greenspan had started this and see what is happening to US. The mortgage rates in US which varies from 6.5 to 7.5 per cent when you add up other bank charges, not much different from here, even RBA rate is 3 per cent, and thus cutting in interest rates are not helping to the nation. Furthermore, in Australia productivity increase is due to company cutting the workforce. In Australia, people love beaches and beer and demanding higher wages. so when Governor Steven speaks it makes sense. Hope you agree with me.
Ian Macfarlane let the property bubble happen. He should have had rates at 10 per cent in 2004 (Time to muzzle the RBA? June 15). Who cares about the speeches!
Glenn had to open up and become transparent because of the momentum that the Rothschild central banking conspiracies were gaining post GFC and the Wall Street $700 billion ransom scam (Time to muzzle the RBA? June 15). Keeping their mouths shut would have played into the hands of those calling for a type of financial coup. If you think that's all crazy talk then prepare yourself to be surprised. The popular anti-banking cartel movement is very large and strong. Common people are becoming very suspicious about the activity of the central banks, investment banks and the big retail banks. Something very big is brewing. Why else would Zerohedge and King World News be such huge site these days?
Two points (Time to muzzle the RBA? June 15).
First: any assertion that the RBA governor holds the second most important position in the land is open to challenge, if not outright ridicule.
This typifies the economist's point of view. Speaking as an engineer, I note that economists produce precisely nothing, yet they almost always grossly incorrect. This can be determined by simply reading the divergent views of economists – they can't all be right. It's about time that economists took a step away from the "levers of power" and their other toys and asked themselves a few hard questions, like when they are going to get real jobs.
Second, and in response to James Munro, above (June 15, 10.39am): Hear! Hear!
James's observations are spot on about the salaries of not only the RBA's governor but also the wallet-stuffing upstarts who run the world's major banks, including our fabled big four.
What a grandiose yet irrelevant title the governor of the Reserve Bank of Australia has! Does this mean that, like state governors, he takes instruction from the Queen? Call him senior clerk and another image emerges... but I digress.
Is the governor of the RBA actually the second most important person in the land? How about considering the amount of damage that position-holders can do? By this assessment, both Gina Rinehart and the leader of the opposition are in with a chance, as also the governor of the ACTU. (Gotta love that handle.)
Or, perhaps, by the amount of good that they can do if they are successful in their position – in which case motivation, communication skills and positive outlook are essential. I'll leave it for others to nominate candidates under these criteria.
Perhaps, with an eye to the long game, environmental and social outcomes are appropriate criteria.
Whatever turns you on, but please don't ask me to agree that he (always a "he") representing the dreary science, the beancounting classes and bureaucracy at its peak, especially from blood-sucking Canberra, is Australia's No. 2.
James, may I suggest a number of counter points (Time to muzzle the RBA? June 15).
1. Stability. The entire point of the Adelaide speech was to highlight that whist our economy was going through massive structural change The Reserve Bank is across it and is prepared to maintain a watchful eye and act if they felt the counterbalancing forces were going to create unhealthy imbalances – i.e. they are there supporting stability.
2. Economic leadership. Your correct in highlighting the governor of The Reserve is the second most important job and economic leadership is a key function of that job. However, if the PM and leader of the opposition were effective in detailing a positive or progressive economic narrative for the country do you think the governor would feel the need to play that role. Your piece today contradicts itself in its conclusion "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". That’'s what the governor was doing!
Confidence in economic leadership is exactly what the Adelaide speech was all about and for Brisbane; it was the perfect opportunity for the governor to subtly tell the politicians to get on with it. Why would he miss that opportunity?
Finally on payments. The Reserve Bank is the regulator for the payments policy in this country. Not APRA ASIC or the ACCC. The governor gave that speech as only the governor could by highlight how seriously the RBA is taking this very important policy position. This policy announcement is the most important structural reform for the banking sector over the last 10 years and he wants the banks to sit up and take notice. Job done!
Well done governor!
Three interesting comments from readers (Time to muzzle the RBA? June 15).
1. The last governor let the property bubble happen, who cares about the speeches.
2. Australia sailed through the GFC relatively unscathed. Actually we weren't forced to take our medicine like other countries so we continued to get economically sicker.
3. Govts have absorbed private sector debt. True and we are horrified at their debt levels but it's only a fraction of what the private sector owes to the rest of the world.
Summary of comments, is he making it a little harder to continue what is clearly a nonsense campaign by the press in this country? Oh you poor dears (Time to muzzle the RBA? June 15.)
In my view, the governor needs to speak more regularly since the RBA's powers over monetary policy have slowly been diluted (Time to muzzle the RBA? June 15). And now the most powerful lever (interest rates) has been hijacked by the banks. Maybe Kohler can create a chart to track RBA effectiveness against governor speeches?
Give the guy a break. If he was not saying enough then we would all be demanding more RBA response (Time to muzzle the RBA? June 16).
Although Glenn, its really all about communication, is it not. Glasses half full, is a bit trite.
It's hard, for the head of the RBA to know what to say, when you have a government that is prepared to do anything to win support.
The world's biggest marine park - wow! Is that how you attract attention? Well it worked, how much will it cost? Who cares, just add it to the credit card. It will certainly help, the indigenous population, those on the basic wage, the single mothers, deserted wives, the homeless, the orphaned children.
Without communication skills, you can not explain, where Australia is going. Having good ideas is irrelevant, we all have good ideas. Australians want to see the goal! When you talk about energy efficiency and fail to describe efficiency, then it all becomes wishful thinking. Markets don't work on wishful thinking and that's not Glenn Stevens fault.