Bloomberg News

Swan Says RBA’s Stevens Done ‘Superb’ Job as Term End Nears

January 14, 2013

Australian Treasurer Wayne Swan said central bank Governor Glenn Stevens has the support of the prime minister and the country, while stopping short of saying the government will reappoint him this year to another term.

“He’s done a superb job. He certainly has the strong confidence not only of the Australian government but I believe broadly across the Australian people,” Swan told Bloomberg Television in an interview today in Hong Kong. “His term’s still got a little way to run, so I’m not going to speculate about that.”

Stevens’s term as Reserve Bank of Australia chief ends in September, around the time when Prime Minister Julia Gillard may call an election, and her government hasn’t openly endorsed his reappointment. Under the Reserve Bank Act, the treasurer names the governor and his No. 2 for terms of as many as seven years. Deputy Governor Philip Lowe was appointed in February last year.

“Regarding the appointment or reappointment of Governor Stevens, I don’t speculate about those matters,” Swan said. “But I can say, very clearly, that he has the strong support and confidence of the Australian government.”

The Australian dollar bought $1.0562 at 3:44 p.m. in Sydney compared with $1.0547 before Swan’s remarks.

Inflation Record

Stevens himself hasn’t said publicly whether he wants to extend his tenure. Since taking the helm in September 2006, he has presided over annual inflation that’s averaged 2.8 percent - - within the RBA’s target range of 2 percent to 3 percent -- and unemployment near 5 percent as the world’s 12th-largest economy extended a recession-free era to 21 years.

“Markets would welcome an early confirmation that he’d be staying on,” said Saul Eslake, chief Australia economist for Bank of America Corp.’s Merrill Lynch division. “He has the confidence of markets, and by comparison with almost all of his peers, he’s got a pretty good track record.”

Stevens, 54, was one of six central bankers given a top grade in a 2012 ranking by Global Finance magazine based on their ability to control inflation, achieve growth goals, maintain a stable currency and manage interest rates. It was the fourth straight year he received an ‘A’ in the evaluation.

Even so, he was drawn into a controversy last year as corruption allegations at the central bank’s note-printing units prompted a day of testimony to a parliamentary panel on the biggest scandal at the RBA since it gained independence in 1996.

Bribery Allegations

Eight former managers and employees at the central bank’s Note Printing Australia Ltd. unit and Securency International Pty face charges in relation to the alleged bribing of officials in Malaysia, Indonesia and Vietnam from 1999 to 2004 to win bank-note printing contracts.

Stevens said in the Oct. 8 testimony that while he believed officials who reported to him acted appropriately, there should have been more questioning and “skepticism” of both companies.

Gillard and Swan expressed support for the RBA governor during the controversy.

They also spent much of last year encouraging the central bank to lower rates and stimulate the economy as they budgeted for a A$44 billion ($46 billion) swing back to the black in time for an election due by late this year. The government is seeking to benefit from lower borrowing costs in an economy where 90 percent of mortgages have floating rates.

The RBA lowered the cash rate to 3 percent on Dec. 4, matching a half-century low after 1.75 percentage points of cuts since Nov. 1, 2011. On Dec. 20, Swan announced that the government was unlikely to meet its pledge to deliver the surplus this fiscal year as weaker growth and a strong local currency curb tax receipts.

In today’s interview, Swan also said China’s economy has stabilized, Australia’s prospects remain strong and the U.S needs to do address its fiscal problems to alleviate risks to the global recovery.

To contact the reporters on this story: Michael Heath in Sydney at mheath1@bloomberg.net; Rishaad Salamat in London at rishaad@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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