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2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
RESERVE BANK AMENDMENT (ENHANCED INDEPENDENCE) BILL
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
General outline and financial impact..................
.......................3
Chapter 1 Amendments......... .......................................5
Index ....................................
..................................9
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|RBA |Reserve Bank of Australia |
General outline and financial impact
Amendments
Schedule 1 of the bill amends the Reserve Bank Act 1959 to enhance
the independence of the Board of the Reserve Bank of Australia
(RBA), by removing the authority of the Treasurer to appoint,
suspend and terminate the positions of the Governor or Deputy-
Governor of the RBA, and placing this authority in the hands of the
Governor-General.
Schedule 1 of the bill also outlines that, in the case of the
termination of the positions of the Governor or the Deputy-Governor
of the RBA, the Governor-General exercises this authority at the
discretion of the Parliament.
Schedule 1 of the bill also amends the Reserve Bank Act 1959, such
that the Governor or Deputy-Governor of the RBA, should they resign
from office, provide a written letter of resignation to the
Governor-General.
Date of effect: The amendments to the Reserve Bank Act 1959
contained in this bill will commence the day after it receives
Royal Assent.
Proposal announced: This measure was announced in a joint press
release between the Prime Minister and the Treasurer on
6 December 2007.
Financial impact: Nil.
Compliance cost impact: Nil.
Chapter 1
Amendments
Outline of chapter
1. Schedule 1 of the bill amends the Reserve Bank Act 1959 to enhance
the independence of the Board of the Reserve Bank of Australia
(RBA), by removing the authority of the Treasurer to appoint,
suspend and terminate the positions of the Governor or Deputy-
Governor of the RBA, and placing this authority in the hands of the
Governor-General.
2. Schedule 1 of the bill also outlines that, in the case of the
termination of the positions of the Governor or the Deputy-Governor
of the RBA, the Governor-General exercises this authority at the
discretion of the Parliament.
3. Schedule 1 of the bill also amends the Reserve Bank Act 1959, such
that the Governor or Deputy-Governor of the RBA, should they resign
from office, provide a written letter of resignation to the
Governor-General.
Context of amendments
4. These amendments respond to the model of central bank independence
in implementing monetary policy that is now regarded as
international best practice.
5. The amendments contained in this bill form part of the Government's
commitment to enhancing the independence of the RBA.
6. The Prime Minister and the Treasurer jointly announced on
6 December 2007 that the appointments of Governor and Deputy-
Governor will be made by the Governor-General in Council and their
terminations will require Parliamentary approval.
Summary of new law
7. The amendments provide that the authority to appoint, suspend and
terminate the Governor or Deputy-Governor of the RBA will be
transferred from the Treasurer to the Governor-General, and that
the decision to suspend or terminate either the Governor or Deputy-
Governor of the RBA will be made on the grounds of the following
conditions. [Item 3, subsection 8 of the Reserve Bank Amendment
(Enhanced Independence) Bill].
If the Governor or Deputy-Governor:
. becomes permanently incapable of performing his or her
duties; or
. engages in any paid employment outside the duties of his or
her office; or
. becomes bankrupt, applies to take the benefit of any law for
the relief of bankrupt or insolvent debtors, compounds with
his or her creditors or makes an assignment of his or her
salary for their benefit.
8. The amendments also provide that both Houses of Parliament must
resolve, in the same sitting, to address the Governor-General
praying for the termination of the Governor or Deputy-Governor,
based solely on the above conditions. [Item 3, subsection 8 of the
Reserve Bank Amendment (Enhanced Independence) Bill].
9. These amendments also provide that should the Governor or Deputy-
Governor of the RBA resign from office, they are to provide a
written letter of resignation to the Governor-General.
Comparison of key features of new law and current law
|New law |Current law |
|The Governor-General will|The Treasurer has the |
|have the authority to |authority to suspend, or|
|appoint, suspend or |terminate the Governor |
|terminate the Governor or|and/or Deputy-Governor |
|Deputy-Governor of the |of the RBA, on the |
|RBA, subject to the |grounds specified in |
|conditions specified in |section 25 of the |
|Item 3, subsection 8 of |Reserve Bank Act 1959. |
|the Reserve Bank |The Treasurer is not |
|Amendment (Enhanced |accountable to the |
|Independence) Bill. |Parliament in his or her|
|The appointment of the |decision to suspend or |
|Governor or |terminate the Governor |
|Deputy-Governor can be |and/or Deputy-Governor, |
|terminated, at the |should he or she choose |
|request of both Houses of|to do so. |
|the Parliament; however, |Should the Governor |
|both Houses of Parliament|and/or Deputy-Governor |
|must concede that the |of the RBA resign from |
|Governor or |office, they are to |
|Deputy-Governor has |provide a written letter|
|failed in their duties, |of resignation to the |
|based solely on the above|Treasurer. |
|specified conditions. | |
|Should the Governor or | |
|Deputy-Governor of the | |
|RBA resign from office, | |
|they are to provide a | |
|written letter of | |
|resignation to the | |
|Governor-General | |
Detailed explanation of new law
10. This bill provides for enhanced independence of the RBA by
increasing the statutory independence of the positions of the
Governor and Deputy-Governor of the RBA.
11. Greater protection will be provided to the positions of the
Governor and Deputy-Governor of the RBA, as their appointments will
be made by the Governor-General, and their removal will require the
approval of both Houses of Parliament.
12. Under the current law, the Treasurer has the sole authority to
appoint, suspend and terminate the Governor and/or Deputy-Governor
of the RBA, and thus, may do so without reference to the
Parliament.
13. This bill provides that the Governor-General may appoint the
Governor or Deputy-Governor of the RBA, subject to the conditions
outlined in section 24B of the Reserve Bank Act 1959. [Item 2 of
the Reserve Bank Amendment (Enhanced Independence) Bill].
14. Currently, the Treasurer may terminate or suspend the positions of
the Governor or Deputy-Governor of the RBA under the following
conditions:
If the Governor or Deputy-Governor:
. becomes permanently incapable of performing his or her
duties; or
. engages in any paid employment outside the duties of his
or her office; or
. becomes bankrupt, applies to take the benefit of any law
for the relief of bankrupt or insolvent debtors, compounds
with his or her creditors or makes an assignment of his or
her salary for their benefit.
15. This bill will preserve these conditions for vacation of office, as
outlined in the Reserve Bank Act 1959, as grounds for termination.
However, the authority to suspend or terminate the Governor or
Deputy-Governor of the RBA will belong to the Governor-General.
[Item 3, of the Reserve Bank Amendment (Enhanced Independence)
Bill].
16. This bill provides that the Governor-General may suspend the
Governor or Deputy-Governor from office on a ground of vacation of
office, as specified in [Item 3, subsection 8 of the Reserve Bank
Amendment (Enhanced Independence) Bill].
17. This bill provides that the Treasurer or Treasurer's representative
must identify, to each House of Parliament, within 7 sitting days
of the suspension of either the Governor or Deputy-Governor the
reasons for their suspension.
18. A House of Parliament may, within 15 sitting days, declare by
resolution that the appointment of the office holder identified
should be terminated. Providing that this resolution is passed by
each House of Parliament, in the same session of the Parliament,
the Governor-General is obliged to terminate the appointment to
which the resolution relates.
19. This bill provides that the suspension of the Governor or Deputy-
Governor does not affect their entitlement to be paid remuneration
and allowances.
Index
Schedule 1: Amendments
|Bill Reference |Paragraph number |
|Item 2 |1.13 |
|Item 3 |1.15 |
|Item 3, subsection 8 |1.7, 1.8, 1.16 |