Game of Loans: the Reserve Bank of Australia loses its runner-up to Fortescue’s green fund
The Reserve Bank of Australia was troubled today by the resignation of its Deputy Governor Guy Debelle, who is leaving on just six days’ notice.
Dr Debelle said he was stepping down to become chief financial officer of Andrew Forrest’s Fortescue Future Industries, a company that invests in zero-emission technologies such as green hydrogen.
The move came as a surprise given that, as an MP, Guy Debelle has long been seen as the heir apparent to Reserve Bank Governor Philip Lowe, whose term expires in September next year.
Dr. Debelle was only reappointed as deputy last year.
Debelle was one of the brightest, if not the brightest sparks in the bank.
He managed the day-to-day response to the global financial crisis when he led the bank’s capital markets group and the economic response to the COVID crisis as Deputy Governor.
He is recognized around the world, from the corridors of the Massachusetts Institute of Technology where he was a visiting professor, to the world of central banking, where he chaired several international committees.
What prompted Guy to leave?
Why then did Debelle jump ship? As Deputy Governor, he has shown a keen interest in the transition to a net zero economy, delivering several speeches on how this move will affect Australia’s economy and its financial system.
But as recently as last month it appeared he still hoped to receive the keys to the Reserve Bank vault at Martin Place in Sydney, testifying in Parliament that he did not own any financial assets in order to minimize disputes over interest received.
However, his interest in the zero-emissions transition notwithstanding, it appears his decision to leave was partly because his status as governor-in-waiting was no longer a safe bet.
A drama called Succession
The Reserve Bank has been criticized for missing its inflation target five years in a row and for its “groupthink” – a reluctance to pay attention to outside ideas.
Regardless of who wins the next federal election, both political camps have promised an investigation into the bank to determine why it made such an apparent mistake and what needs to change to ensure it doesn’t happen again.
Given his apparent failure, it is possible that the Treasury and its political masters felt that another internal appointment would be inappropriate and that the next governor should be appointed from the outside to shake things up.
Guy Debelle may also have seen writing on the wall about diversity.
The bank has not had a female governor in the 100 or more years since it printed its first banknote.
By contrast, the High Court of Australia appointed its first female judge in 1987, South Australia appointed the first female state governor in 1991 and Victoria the first female police commissioner in 2001.
While the RBA has made a concerted effort in recent years to encourage greater diversity within its workforce, compared to the rest of Australia it remains masculine, pale and outdated, particularly at senior levels. .
Share of women in the labor force
Percentage of total as of June 30, RBA versus Australian workforce. Reserve Bank of Australia
In this regard, the Reserve Bank is behind the times. The appointment of Guy Debelle as governor would have kept him in place for perhaps another decade.
Who will inherit the throne?
All eyes will now be on who will be named deputy governor in place of Debelle – and potentially the next Reserve Bank governor.
If Treasurer Josh Frydenberg wants to keep some continuity, he may well choose one of the deputy governors. The two most likely are Dr Luci Ellis and Dr Chris Kent, who together oversee the bank’s monthly policy process as heads of the economics and financial markets groups respectively.
Alternatively, Frydenberg may choose to inject new blood before the post-election review.
Terrific economists such as Dr David Gruen, the current head of the Bureau of Statistics, and Jenny Wilkinson, the current head of the Treasury budget group, could start.
Each has worked at the Reserve Bank and each has an outside perspective.
One thing is clear is that an orderly coronation has been thrown in the trash.
With a review looming and a change of government likely, the post of deputy governor could well be a poisoned gift – an impossible task with little time to learn on the job.
The only certainty in the bank is the turbulent times ahead.