The announcement of Paul Conway as the new Chief Economist at the Reserve Bank highlights a disturbing development at the Bank, says Positive Money NZ’s national spokesperson Don Richards.
“In simple terms, we now have a revolving door at the highest levels between the Reserve Bank and the big Aussie banks it regulates,” he says.
The problem is that Mr Conway will be fresh from the BNZ—he still works there. He will join both the Reserve Bank’s top Executive Leadership Team and the elite Monetary Policy Committee (MPC), the group that drives monetary policy and sets interest rates for the economy.
“And he will join yet another recent ex-banker appointee on the MPC, Karen Silk. Ms Silk will also join the Reserve Bank’s Executive Leadership Team, fresh from the Westpac bank where she still works,” says Mr Richards.
“So, two of the Reserve Bank’s top managers and two of the four internal positions on the powerful, seven-member MPC will be held by bankers with fresh ties at the highest levels of the banking industry.”
The issue is not one of the personal integrity of the appointees—Mr Richards is not questioning that.
“But appearances matter a great deal to public confidence in our key institutions—as does how seriously our top public employers take it.”
Even without evidence of cronyism or worse, the “revolving door” problem exposes our wider system of government to real danger over time, says Mr Richards.
The Reserve Bank is a statutorily-independent body that sets New Zealand’s monetary policy and regulates banks.
“The question must be asked just who the Reserve Bank is independent of, and why are there not stronger measures to keep the banking industry, not just the public’s representatives, at bay,” Mr Richards says.
“It’s independent of the government of the day but not, it seems, the entities it regulates.”
In the recent amendment of the Reserve Bank Act, Treasury fought to have a seat at the MPC table, Mr Richards points out. But it was knocked back to an “observer” role for apparent fear that it would compromise perceptions of the Reserve Bank’s independence.
“It seems, however, that no one batted an eyelid at the appointment of two senior bankers to this committee,” he says.
“How can the most senior ranks of our public service and government not see a problem here?” Mr Richards asks.
The Reserve Bank, its Board, and the Finance Minister must explain why these appointments were allowed to be made and why such a cosy relationship with the banking industry is entertained, Mr Richards says.
“Is New Zealand so short of talent that the gamekeepers must hire the poachers to enforce regulation and make decisions that determine their profits? Surely we have enough talent in academia, civil society, commerce and the public service to fill these roles,” he asks.
“And if we really don’t, is it time to review the Reserve Bank’s powers which are enormous for a public body so cut off from direct government and voter accountability.”