There won’t be a post here on Monday, but yesterday something caught my eye in the email inbox (and I’m not very much of a rugby fan).
This was the advisory from the Reserve Bank
Text of a speech by Head of Communications and Board Secretary, Mike Hannah, entitled “Engaging with our stakeholders to promote understanding, accountability and dialogue” will be published on the Reserve Bank website at 8:30am on Tuesday 27 June.
It reminded me of an earlier piece by Hannah a couple of years ago. It was a Bulletin article published in May 2015 under the title Being an engaging central bank. It didn’t seem to attract much attention at the time, although I wrote about it. Hannah used the article as, among other things, a platform to highlight how active its engagement was and how transparent it was. I highlighted then some of the many areas in which the Reserve Bank is well off the pace in respect of transparency, particularly around monetary policy.
When Hannah wrote his previous article things must have seemed to be going quite well for the Bank, at around the half-way mark of the Governor’s five year term. The article presented and drew on a survey of external stakeholders about the Bank’s external engagement, that had been done in the second half of 2014. The OCR increases were then well underway, and they and most of the people they regarded as domestic stakeholders still probably thought the Bank was doing the right thing. The Bank used the article to talk up a more active programme of public speaking. And just a couple of months previously Central Banking magazine had named the Reserve Bank of New Zealand as central bank of the year, citing various things to their credit including having been “the first advanced economy central bank to raise interest rates in the current cycle”. (Oops) Graeme Wheeler must have been feeling rather pleased. According to the survey, most “stakeholders” were also reasonably happy with the Reserve Bank’s communication.
It will be interesting to see what Hannah has to say on Tuesday. But it is a little surprising that he is doing such an on-the-record speech when the Governor has less than three months to run on his term. It can’t, one would think, be outlining a new approach – surely anything of that sort would be a matter for the new permanent Governor next year? So we can only assume it will be an explanation and defence of the current approach. If so, given the embattled state of the Bank it is a bit of a surprise that they leave it to a relatively junior member of the senior management group to make the case rather than, say, Hannah’s boss Deputy Governor Geoff Bascand, or indeed the Governor himself.
However they choose to engage, speeches clearly seem to have gone out of fashion again. The Governor gave five on-the-record speeches in 2013, and seven in 2014. Things seemed to be going well then. But in 2015 and 2016 he gave only three on-the-record speeches each year, and in the first half of this year (ending next week) he will have given only one speech. The pattern is pretty similar for his Deputy Chief Executive, Grant Spencer who is being appointed (questionably legally) Acting Governor for six months after Wheeler leaves. He has also given only a single speech this year.
What is a relevant comparative benchmark? Well, Phil Lowe, Governor of the Reserve Bank of Australia will have given six on-the-record speeches in the first half of this year. His deputy, Guy Debelle, who is particularly active on international foreign exchange regulatory matters, will have given eleven speeches in the first half of this year. The Reserve Bank of Australia, it will be recalled, covers a lot less ground than our central bank, not being responsible for the supervisions of banks, non-bank deposit-takers or insurance companies. For most of the RBA senior management speeches, there is also a webcast or audio/video material, something our Reserve Bank doesn’t do.
Here are the numbers for the Governor of each of the other Anglo country central banks, and those of two other small inflation targeters. Of those central banks, only the Bank of England has at least as wide a range of responsibilities as our central bank,
|Governor speeches, first half 2017|
What is striking in some of these central banks is the number, and range, of the speeches done by other senior managers. Our central bank – smaller than most of course – will have done four on-the-record speeches in total in the first half of this year.
However the Reserve Bank engages, it isn’t through media interviews either. The Governor now seems to give a soft interview to the Herald the day after a Monetary Policy Statement, but that seems to be it. In almost five years he has given not a single searching interview to any media outlet. Perhaps that is not so unusual internationally, but the Governor here wields personally an unusually large amount of power, and the Bank has been rather active (interest rates up and down, and more and more regulatory interventions) in the last few years. Doing citizens the courtesy of a sustained interview once in a while – an interview that is more than advertorial – would seem the least a Governor could do. The Governor is said to be uncomfortable with the media. In a role such as his that should really be disqualifying.
Of course, we now know that the Governor doesn’t much like criticism either. In fact, one of the ways he engages (was that to promote “understanding”, “accountability” or “dialogue”?) is to send his senior managers out to try to whip critics into submission. And when that doesn’t work, he sends threatening letters to the chief executive of a bank he regulates, calling for the critic concerned to be censored, to end the risk of upset to the Governor. Perhaps Hannah will be able to offer some statistics on the frequency of “engagements” of this sort? Perhaps he could offer some thoughts on the legitimacy of such engagements (after all, the Governor hasn’t been willing to front up in public)? And on the effectiveness of them? Does he judge that they have enhanced the Bank’s standing, and public/stakeholder confidence in the institution?
We also know another way the Reserve Bank was engaging, but is no longer. Under Hannah’s stewardship the Reserve Bank was for years running lock-ups for journalists and analysts just prior to the release of MPSs and FSRs. Unfortunately, they took that engagement so far that the procedures they used were so lax that people in the lock-ups could simply email highly confidential market sensitive stuff back to their offices (or indeed to anyone else). That came to a crunching end when, somewhat by accident, I became aware that something of the sort seemed to have actually happened: MediaWorks staff in the lockup had been emailing things back to their office (who knows how many times before?) and on this occasion someone in their office passed the early information on to me (I was to be a guest on their show later that day). In response, the Governor’s idea of engagement was to (a) largely whitewash MediaWorks, while (b) attacking me as irresponsible, even though I was the person who had brought to their attention what turned out to be both an actual leak and a serious weakness in their procedures. Perhaps there will be some reflections on that sort of engagement? Probably not though.
We’ll see what Hannah has to say on Tuesday. But in many respects it doesn’t much matter now. The embattled Wheeler will be gone in three months, and Spencer – probably not really the problem – will be gone in nine. The challenge for the new permanent Governor – and something the Board and the Minister should be looking for in identifying potential appointees – is to move towards much greater openness and effective open engagement. There are so many fronts on which reform is overdue that it could make a post in itself.
So many other central banks are now so much further ahead of our central bank in this area (as well as others). In most of them the whole institution has rather less power in the whole institution than is here concentrated in a single individual. It is a shame, as the Reserve Bank could once reasonably have been said to be in the forefront of openness, transparency and honest engagement. Now it is quite a laggard in this and other areas, with pre-existing institutional weaknesses reinforced by the problems of a thin-skinned insular and embattled Governor. An engaging Governor would be a huge step forward towards a more engaging, open and accountable and central bank. Whoever is Minister of Finance when the appointment is made should insist on it.