Central Banks and the Press

Speech

Notes

From the Shadows to the Podium: Central Banks and the Press Andrew Hauser [ * ] Deputy Governor Remarks at the Business Journalism Awards Sydney – 8 October 2024 Audio 49MB Q&A Transcript Watch video: 'From the Shadows to the Podium: Central Banks and the Press', Remarks by Andrew Hauser, Deputy Governor, at the Business Journalism Awards It’s a privilege to be with you today and to announce the shortlist for the 2024 Walkley Business
Journalism Award. I am not the first senior official of the RBA to address this event – but, to put it mildly, our
central banking predecessors a hundred years ago would have been surprised to see us here. The high priest of central banking in the mid-1920s was Montagu Norman, Governor of the Bank of England.
Norman was an extraordinary character – a devotee of mysticism, who wore a long flowing cloak and
travelled under the fake name of Professor Clarence Skinner. His communications strategy was succinctly
summarised in the pithy phrase ‘never explain, never apologise’. He regularly put those words into practice. When asked by a Parliamentary select committee in 1930 to
rationalise a particular course of action, for example, he simply tapped the side of his nose three times
and stared into the distance. Despite – or perhaps because of – this unusual behaviour, journalists loved him. A breathless
1932 New York Times pen portrait, entitled ‘Banker and Legend’, purred: ‘Mr
Norman is all elusiveness, technique, finesse … he sits silent, discreet,
unseen … exercising a power unthought of by old-fashioned tyrants and only glimpsed by
alchemists of long ago poring over their crucibles.’ ¹ Sadly, that passion went unreciprocated. Indeed, Norman made titanic efforts to avoid the press. Once,
aboard ship in rough seas, word reached him that reporters were gathering to question him at the next
port. He promptly leapt over the rails, shimmied down a rope ladder, and made his escape in a dinghy. ² ‘Never explain, never apologise’ permeated every aspect of the Bank of England’s operations
at that time. Not for them, the modern paraphernalia of glossy reports, explainers and press conferences.
For much of the 20th century, changes in official interest rates were communicated solely through the
medium of a large printed card, placed in the Bank’s ornate lobby, and a simultaneous verbal
announcement by the ‘government broker’ to traders in the government bond market. To effect
that announcement, the broker removed his top hat, stood upon a bench, and bellowed at the top of his
voice. ³
Fleet Street’s finest played no role. Indeed, even when I joined the Bank of England in the early 1990s, the main job of the Head of the Press
Office was still said to be, with little irony: ‘keep the Bank out of the press and the press out of
the Bank’. ⁴ That mindset extended well beyond the United Kingdom. The US Federal Reserve, for example, was established in conditions of such extreme secrecy, that those
meeting to agree its charter in 1910 tried to pass off their discussions as a recreational duck hunting
trip to Jekyll Island, Georgia. Three quarters of a century later, they were still at it. In 1987, Alan
Greenspan famously told members of the US Congress: ‘since I’ve become a central banker,
I’ve learned to mumble with great incoherence … if I seem unduly clear to you, you must
have misunderstood what I said.’ He was only half joking. Over recent years, however, things have changed profoundly as central banks have emerged blinking into the
sunlight of greater transparency – a process dubbed the ‘quiet revolution’ by Alan
Blinder. The revolution certainly began quietly. The RBA, for example, only began announcing changes to its policy
rate to the media in 1990. Prior to that, market participants were expected to draw their own conclusions
about what had happened by scrutinising the detail of the Bank’s market operations. ⁵ In the years since, however, the revolution has got louder. Central banks now produce a vast stream of
material, from written inflation reports, research material and policy committee minutes, to increasingly
interactive public appearances, including speeches, Parliamentary scrutiny, conference panels,
on-the-record interviews and press conferences. All of that reflects two key drivers. The first is the recognition that the huge powers conferred on central banks by the granting of
operational independence – powers that affect every citizen in the country – come with an
essential quid pro quo . And that is the obligation to account for our actions: to explain,
and to be scrutinised and challenged. That need for explicit public accountability has been further
amplified by the burgeoning scale, scope and complexity of central bank operations; by back-to-back
crises; and by the more demanding public expectations of public institutions generally. ⁶ But transparency and challenge isn’t just something we have to do: it manifestly also
drives better policymaking. Public understanding and trust in our mission helps to anchor
inflation expectations – a vital component of effective monetary policy. Knowing how central banks
see the economic outlook, and how policy will respond to changes to that outlook – our so-called
‘reaction functions’ – affects behaviour today. Indeed, for many economies, the vast
majority of the effect of monetary policy comes not from changes in today’s official interest rate,
but through expectations about how those rates will evolve in the future. So communications is everything
– or almost everything. But those benefits only accrue if we get our message across – not just to the modern descendants of
those top-hatted bankers, but to the public at large. And that’s where we need all of you in this
room. Because, let’s face it, central bankers globally have had a mixed track record historically
when it came to clear and effective communications – even when they were trying. Back in 2017, Andy
Haldane – then Chief Economist of the Bank of England – estimated the minimum reading age
required for a range of public communications, including central bank publications, the Economist , Elvis Presley’s lyrics and Donald Trump’s speeches. He found that
Trump’s speeches could be understood by three-quarters of the population, and Elvis’s lyrics by
only slightly less. But the complexity of most central banking communications at that time meant they
could reach at most only 10 per cent of the public. ⁷ That is no basis for building
broad-based trust, credibility and understanding. It was clear we could do better – and we are. Research from the European Central Bank (ECB) shows
that its current President, Christine Lagarde, uses language that is far more widely comprehensible than
her predecessors, on Haldane’s measures. ⁸ Similarly, the approach adopted by our own Governor,
Michele Bullock, at the RBA’s new press conferences has won widespread praise for its clarity and
simplicity. But the fact is that most people still hear about us through you. Despite the increasingly fractured
landscape of social media and on-demand streaming, overwhelmingly the dominant source of information
about central bank policy remains the good old press, TV and radio. ⁹ So we need your skills as
translators and explainers. More importantly still, we need your challenge. As public officials, knowing your analysis has to
withstand public scrutiny drives an enormous lift in the quality and robustness of that analysis. I saw
that up close at the Bank of England in the 1990s when we first embraced real transparency. Poor
arguments, which once went unquestioned in grey smoke-filled rooms, did not survive the rigour of public
examination. So, whatever may have been alleged in some quarters, both I and the RBA strongly welcome
challenge, scrutiny and debate. Of course, it’s sometimes less fun when robust press scrutiny bleeds over from the purely
technocratic to the personal. That’s certainly familiar to someone, like me, who comes from a
country whose press managed to summarise a particularly salacious episode in the central bank’s life
as ‘It’s the Bonk Of England’, filmed a live runoff between a recent prime minister and a
decaying lettuce, and followed the Bank of England Governor to the office every day for a week during
Covid in a somewhat confused attack on the Bank’s policy on working from home. Some past RBA
Governors have had to face similar treatment. But all of us in public life must – and do – recognise the privilege that comes with our
roles, and the accountability we owe, via you, to the public at large. So I want to thank you – not
just for the vital role you play in helping to explain the complexities of economic policy, but also for
your informed scrutiny and challenge, which forces us to raise our game and stay accountable for the huge
powers we wield. If the cleansing effect of transparency is to continue to be effective, so must your
role. With that, let me turn to my main task here today, which is to announce the finalists for the 2024 Walkley
Business Journalism Award. The goal of these Awards is to encourage journalists to pursue rigorous and
fearless reporting in the field of business, economics and finance. And they have certainly met that
brief this year! And with that I look forward to our discussion here today. Thank you. Endnotes I am grateful to David Bold, Ann Collings, Sally
Cray, Stephen Cupper, Paula Drew, Bradley Jones, Sarah Middleton-Jones, Beth Tasker, Megan Thomas
and Greg Tyler for their help in putting these remarks together. [*]
<https://www.nytimes.com/1932/04/17/archives/montagu-norman-banker-and-legend-again-elected-governor-of-britains.html>
¹ Many of these stories come from the marvellous Lords of Finance by Liaquat Ahamed (Penguin Press, 2009). As the book describes, the
obsession with secrecy sometimes reached farcical proportions. When the Bank of England was
forced by rapidly mounting financial losses to take the United Kingdom off the gold standard in
1931 – one of the most momentous economic decisions of the 20th century – frantic
officials were unable to consult openly with the Governor because he was travelling by sea. The
attempt to send the message in code (‘sorry we have to go off tomorrow and cannot wait to
see you before doing so’) was badly misinterpreted by Norman, who thought it just meant his
colleagues were taking a well-earned break. When he realised his life’s work had been undone
in his absence, it took him days to get over the shock. ² Kynaston D (2017), Till Time’s Last
Sand: A History of the Bank of England : Bloomsbury, p 273. ³ Capie FH (2010), The Bank of England: 1950s
to 1979, Cambridge: Cambridge University Press. ⁴ Battellino R, J Broadbent and P Lowe (1997), The Implementation of Monetary Policy in Australia , RBA Research Discussion Paper
9703. It was another 17 years before media releases recording no-change decisions. ⁵ These and other points in my remarks are covered
in greater depth by Stevens G (2007), ‘ Central Bank Communication ’, Address to The
Sydney Institute, Sydney, 11 December 2007. ⁶ See Chart 17 in Haldane AG (2017), ‘A
Little More Conversation A Little Less Action’, Speech given to Federal Reserve Bank of San
Francisco Macroeconomics and Monetary Policy Conference, 31 March. ⁷ See Figure 4 in Blinder AS, M Ehrmann, J de
Haan, and D-J Jansen (2024), ‘Central Bank Communication with the General Public: Promise or
False Hope?’, Journal of Economic Literature , 62(2), pp 425–457. ⁸ See Chart 4 in Gardt M, S Angino, S Mee and
G Glöckler (2021), ‘ECB Communication with the Wider Public’, ECB Economic
Bulletin , Issue 8/2021 . ⁹