Thinking of words that would describe the man, the first two that come to mind are calm and measured. I could add objective to this list. Whether appearing before a Parliamentary Committee, or in his speeches and other pronouncements, there was caution, a careful use of words to express often complex issues in a balanced way. This built trust, a feeling (to use a cliche) of a safe pair of hands. This was especially important during the Global Financial Crisis.
Mr Stevens is clearly a very intelligent man and an expert in his field, an expertise built through years of service to a single institution To my mind, he is the ultimate technocratic mandarin. The institution he headed, Australia's Reserve Bank, has established a reputation for independent objective advice. This began before Mr Stevens term, but he has maintained the Bank's role and position.
The one scandal that affected his term, the note issue scandal, came about because the Bank desired to commercialise technology and in so doing moved into a new arena outside its core activities that it was not well equipped to deal with. The fact that the Bank survived the scandal without lasting damage to its reputation is a reflection of just how good it is at its core business.
One very good feature of the Bank is the way it allows, encourages, its senior staff to speak in public on issues falling within its remit. Of course they speak in careful terms, taking into account the Bank's position, but they do so with objectivity, presenting evidence with considerable clarity. Here I want to pay the Bank what, to me, is the ultimate compliment.
The Bank is one of the few public institutions in Australia where I read stuff without worrying that the evidence has been tailored to the message, In the Bank's case, the message is meant to flow from the evidence. Further, the presentations reflect the ambiguities and uncertainties associated with imperfect evidence. The result is that I know what the Bank's position is, but can engage at an intellectual level. When pressed for time as I so often am, I can take the Bank's position as a starting point, knowing that I won't go too far wrong.
We live in a world that demands answers, certainties, fixed deliverables. In most cases, these do not, cannot, exist. In this world, it's rather nice to have an institution that one can still trust.
21 comments:
Yes, I agree with your assessment Jim! LE
Yes, agree with LE, so here's a "hear, hear!" for your post. kvd
It's good to give recognition for a job well done!
How come he asked the incoming Abbott government for $8bn and got it!
DG
I also agree about the contribution of Glenn Stevens. I think his departing message is extremely important, but it will probably be ignored by our political leaders. So, I would be grateful for advice about where in the world other than Australia I could invest my meagre savings to help my grandchildren to service the debt that our government will be bequeathing to them.
Good morning, DG. Perhaps because the Government had been raiding the Bank and the balance sheet needed to be fixed up?
I see your problem, Winton. You need a country where Government spending is a lower proportion of GDP than Australia, where the budget is in surplus, and debt (public and desirably private too) is lower per capita and as a % of GDP. New Zealand, Singapore, Iceland? I just don't know!
Jim, NZ is looking relatively attractive. I am not sure NZ qualifies on all the criteria you mention but their fiscal performance in recent years has been admirable. Taxes on company profits seem less likely to rise in NZ than Australia. From my perspective NZ also has the advantage of being an economy that I am familiar with, and some shares in NZ companies are listed on the ASX.
If a lot of investors are thinking the way I am thinking that will will help NZ to prosper relative to Australia.
And if they 'prosper relative to Australia' that long awaited $parity might occur - and offset any rapacious scheme you might be concocting, Winton :)
kvd
kvd: If the $NZ does rise to parity or beyond that will add to my capital gain. That raises the issue of how to avoid capital gains tax when the capital is repatriated. One way to avoid that would be to move to New Zealand, but I'm not sure I would go that far.
You are right that capital flows to NZ.will tend to raise the $NZ. That raises the cost of NZ assets relative to Australian assets. But if NZ economic performance is expected to be superior over the longer term the process could be ongoing. So NZ could remain a relatively attractive location for investment over the longer term.
Anyhow, just musing at this stage. I am not even sure what is the best way to obtain a balanced exposure to NZ shares. It seems more straight forward to diversify away from Australia by investing in the U.S.
But isn't that breaching your principles, Winton? The US public sector debt to GDP ratio is 71.8%, the US budget deficit is improving but is still 2.5% of GDP, the top Federal corporate tax rate is 39% and the country is awash in Treasury Bills
On a more serious note, I haven't looked at the latest NZ stats Probably should.
Yes Jim, the US economy seems to be recovering gradually, but it is difficult to be optimistic about prospects for budget reform.
I think that Australia has better chances of reform than the US
Small chance versus no chance perhaps. But we should not base our judgements too heavily on the presidential race.
NZ's superior economic performance is reflected, inter alia, in the performance of its financial market relative to Australia's. Before the GFC the NZX 50 Gross was in the 3000s; the ASX hit 6500. The NZX is now about 7500 whereas the ASX is now about 5200. Since the GFC, NZ's real income has risen more than 20% relative to Australia's, as reflected by movement in the exchange rate between the NZD and the AUD. Both these factors have been conducive to excellent performance of NZ shares held by Australian investors. The few NZ shares (traded on the ASX) that I hold in my portfolio have risen between 100% - 200% in the last 3 years. NZ's unicameral parliament makes life for the Government of the day much easier.
DG
Thanks DG, good points.
Not to detract from DG's point, but a straight comparison between the performance of the NZX50 and (say) ASX200 ignores the makeup of each index - which in the case of the ASX is heavily influenced by the performance of the mining sector; i.e. where is NZ's BHP and Rio?
Which is not to say that I, too, would not be quite happy having Frodo Baggins as my nearest neighbour :)
kvd
Actually, mining stocks, in particular gold, have performed surprisingly well in the last 12 months. Notwithstanding this, neither the ASX200 nor AXAO could cut the mustard.
DG
NZ GDP maybe 200Bn? One day last week the ASX lost about 30% of that. But not to worry; back up a bit since :)
kvd
Not so sure about much if this. IF you take the fundamentals as being an eventual proxy for stock market performance, then perhaps this info might change your mind:
http://www.nationmaster.com/country-info/compare/Australia/New-Zealand/Economy
News limited periodically puts out a story "Why is NZ doing so much better than us?". It never seems to have more than 2 or 3 years' data, for a reason.
Both NZ and Australia are stockpickers markets, but it's easier in NZ. Also I like it that their economic growth can sustain a higher interest rate than Australia.
DG
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