Swan Siphons RBA In Failed Attempt To Reach Surplus

23 Feb

the.simpsons.s20e05

And here you were believing our politicians and media parrots, when they say that the Reserve Bank of Australia is “independent”.

From The Age (via MacroBusiness):

TREASURER Wayne Swan defied objections from the Reserve Bank governor and siphoned half the central bank’s profits into the Budget bottom line to fulfil his political commitment to achieve a surplus.

The Reserve Bank governor, Glenn Stevens, told a parliamentary inquiry that he wrote to Mr Swan, asking him to direct all of the bank’s $1 billion 2011-12 profit to its critically short reserve fund, needed to absorb changes in the value of the bank’s foreign currency holdings. Normally worth around $6 billion, the fund had dwindled to $2 billion.

”It’s a key part of our capital. It has been depleted considerably by the effects of the rising exchange rate,” Mr Stevens told the inquiry. ”I believe the prudent course is to rebuild it as quickly as we can but I am not subject to the other pressures that the government is.”

Mr Swan denied the request, and insisted on taking half the profit as a dividend to help achieve his promise of a budget surplus this financial year.

That promise has since been dumped, leading to the opposition mounting a sustained attack on the government’s fiscal credibility.

”In the end it was his prerogative,” Mr Stevens said. ”He made a judgment, and I had to accept that judgment.”

Another day, another epic fail by our World’s Greatest Treasurer.

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