Australia’s central bank must keep the power to set senior officials’ pay, averting an infringement of its ability to recruit and retain talent, said Donald McGauchie, who headed the bank’s compensation committee until last month.
Treasurer Wayne Swan indicated this month the government may consider removing the Reserve Bank of Australia’s control of its top executives’ salaries, including Governor Glenn Stevens’s package worth A$1.05 million ($1.15 million). Stevens’s base pay in 2010 was more than what the heads of the European Central Bank and U.S. Federal Reserve made combined.
The debate between the RBA and Prime Minister Julia Gillard’s government centers on the wages the RBA needs to pay to keep officials in public service in a nation with the world’s sixth-highest gross domestic product per capita. The average compensation of chief executive officers of Australia’s four biggest banks in the most recent fiscal year was A$11 million.
“We have an outstanding central bank,” McGauchie, a central bank board member until his term expired last month, said in an interview. “It’s incredibly important that those people are properly remunerated. I mean the last thing we want is the dumbing down of the Reserve Bank.”
The treasurer’s office declined to comment on the issue when contacted by Bloomberg News.
Stevens’s Counterparts
ECB President Jean-Claude Trichet was paid 367,863 euros ($546,570) last year, 2 percent more than his 2009 salary, according to an ECB report in March. Fed Chairman Ben S. Bernanke made $199,700.
McGauchie said the disparity between Stevens and his peers was explained by the belief that an RBA governor wouldn’t be able to command the same income as his global central bank peers after leaving the post.
“You try and compete with Bernanke,” McGauchie, chairman of Nufarm Ltd., Australia’s largest supplier of farm chemicals, said in a telephone interview. “Bernanke will get a quarter of a million dollars a speech when he retires. I mean two or three speeches a year and he’ll make more than our governor.”
Alan Greenspan, after retiring as Fed chairman in 2006, took on roles with Deutsche Bank AG and Pacific Investment Management Co.
Within a year of stepping down as Reserve Bank chief, Stevens’s predecessor, Ian Macfarlane, joined the boards of Australia’s biggest retailer, Woolworths Ltd., the nation’s largest construction company, Leighton Holdings Ltd., and one of its four main banks, Australia & New Zealand Banking Group Ltd. He also took on an advisory role with Goldman Sachs Group Inc.
‘Step Back’
Stevens was one of seven central bank chiefs to receive an ‘A’ grade in a September 2009 Global Finance Magazine survey for navigating their economies through the world’s worst financial crisis since the 1930s.
Australia was one of the few developed countries to skirt the global recession as Stevens slashed the overnight cash-rate target to a 50-year low of 3 percent and the country benefited from sustained Chinese demand for its exports. As the economy rebounded, he raised interest rates in seven quarter-point steps from October 2009 to November last year.
The Reserve Bank forecasts Australia’s economy will expand 4.25 percent this year, driven by mining investment and record job growth that helped spur the nation’s currency to the highest level since it was freely floated in 1983.
Stevens’s salary is more than double that of Gillard’s base pay of A$355,264. Swan has suggested the governor’s pay was too high. In a press conference earlier this month, the treasurer said he understood community concern related to the governor’s compensation, describing it as a “matter that’s before the government.” Read more.
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