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AAP

2013-01-30

Glenn Steven's chances of extending his stay at the helm of the Reserve Bank have been bolstered by Prime Minister Julia Gillard's decision to call a September election.

Ms Gillard on Wednesday announced the election would be held on September 14, three days before Mr Stevens' current seven-year term is due to end.

Economists believe the government could opt to announce an extension to his term before voters go to the polls.

Mr Stevens' predecessor Ian Macfarlane spent 10 years as governor after the Howard government opted to extend his term by three years to 2006.

Bank of America Merrill Lynch Australia chief economist Saul Eslake said the timing of the election meant it would fall to the Treasurer Wayne Swan to decide whether to extend Mr Stevens' term or appoint a replacement.

He said Labor was more likely than the coalition to extend the governor's term.

"There was a risk that had the election been held before September, and the coalition had won it that, Stevens might not have been reappointed," he said.

"There is lingering resentment in the coalition towards Stevens for having raised interest rates during the 2007 election campaign."

The appointment (or reappointment) of an RBA governor is typically announced ahead of the end of the current term.

Mr Steven's appointment by former treasurer Peter Costello to the RBA's top job in 2006 came about seven weeks before Mr Macfarlane retired from the central bank.

HSBC Australia chief economist Paul Bloxham said Mr Stevens was likely to be reappointed, assuming he did not decide to retire from the position.

If the government were to appoint a replacement, he said, they were likely to promote someone from within the RBA's ranks, though they could appoint an external candidate.

"I think the likely outcome is that they will maintain the status quo and we will see the same governor continue but who knows?"

Current RBA deputy governor Phillip Lowe and federal Treasury secretary Martin Parkinson have been mentioned as possible replacements should Mr Stevens' term not be extended.

Mr Bloxham said there was also a risk the timing of the election could lead to the appointment of the governor being politicised.

"I guess there is a chance given the timing, but I think it would be better if it is not politicised given the RBA is an independent central bank."

Evan Schwarten