Anthony Albanese and Jim Chalmers should just let the RBA do its thing

Recent comments from the PM and the Treasurer about interest rates sit somewhere between really just quite silly, but unexceptional, and rather more disturbing and unwelcome.

Anthony Albanese and Jim Chalmers at Parliament House in Canberra. Picture: NCA NewsWire / Tracey Nearmy

Both the Prime Minister and the Treasurer made comments about interest rates during the week that sat somewhere between really just quite silly, but unexceptional, and rather more disturbing and unwelcome.

The PM’s were more controversial. He said – interpreted by some as ‘warned’ – the Reserve Bank not to “overreach” in raising interest rates. The argument went that he’d stepped over the line in seeking to ‘instruct’ the supposedly independent RBA.

I think that criticism was just silly – and really rather twee, harking back to some earlier era of complex rules about what PMs and ministers were supposedly ‘allowed’ or ‘not allowed’ to say in public.

He – and indeed his treasurer Jim Chalmers – are perfectly entitled to make comments about interest rates and indeed about anything else in the economy.

What made it both unexceptional and silly was to think of the counter-factual: if he’d said I do hope the RBA overreaches with interest rates.

That might sound even sillier, but in fact that is precisely what the RBA does have to do. It has to take a, hopefully only one, step too far.

In the 1980s it took rather too many steps too far, when it raised its official rate to 18 per cent and gave us a crushing recession and 11 per cent unemployment.

But it did also kill the double-digit inflation that had plagued Australia since the 1970s and set us up – along with the economic reforms of the Hawke-Keating and Howard-Costello years – to the economic success and prosperity of the 1990s, 2000s and into the 2010s.

I suggest the critics missed the real message in the Albanese comments.

Simply, that they were further evidence of his Whitlam-like disinterest – in both the correct and the colloquial meaning of that word – in what’s happening in the economy and the complexities of economic policy.

He was lucky he wasn’t asked to nominate the RBA’s official cash rate. I really doubt that he could have.

His inability to know it – and the jobless rate – at the start of the election campaign was not, in my judgment, a one-off brain fade, but a revelation that he just wasn’t that interested.

And, again in my judgment, he showed that by immediately embracing the international junket circuit straight after the election, rather than focus on the economic issues and the very real widespread pain facing 26m Australians.

OK, you might say, he was leaving that to the treasurer and below him Treasury and the RBA.

But there’s a world of difference between a Whitlam-like indifference – which Albanese shares – and a Bob Hawke-style delegation to his treasurer Paul Keating. Or, for that matter, the John Howard-Peter Costello relationship.

This makes, as I have written, the treasurer the critical pivot for not just the success of the government politically but the even more important task of delivering for those 26m Australians in what are shaping up as very challenging times.

Next Thursday we get a “Ministerial Statement” from the Treasurer, which he said midweek was going to contain “confronting” detail on especially inflation and interest rates.

That to me, will be a classic example of an ‘incoming CEO’ painting the worst possible picture of the company’s – read: Australia’s – state of affairs, that can all be blamed on the previous CEO.

Further, by doing the big ‘write-offs’ upfront, the only way to go after that is up.

But what’s fine and unexceptional in a company and with a new CEO is rather different with a new treasurer. He’s not talking to shareholders but to 26m Australians. Or is he?

Chalmers also said that “people” had to brace for more interest rate rises in the near future -following on from his comment after the RBA hiked earlier this month that it was “very challenging news for hardworking Australians”.

Hmm. Well, Treasurer, a lot of “people” are not “bracing” for rate rises but very positively “em-bracing” them – the millions of Australians who have been getting zip, zero, nada, nothing in interest on their bank deposits.

To them, the RBA raising rates was not “very challenging” but very welcome news.

Furthermore, it’s actually very welcome news for exactly those people who have home loans; for a RBA which whimped out on raising rates now would be an RBA which had to raise rates much more punishingly some time in the future.

Listening to those people complaining about the RBA raising its official rate to, say, 3.5 per cent – and home loan rates to around 6 per cent – is precisely the path to ending up with the RBA having to raise its rate to, say, 7 per cent and home loan rates to 10 per cent.

Now, we can dismiss the PM’s verbal missteps – that’s Albanese channelling Biden. But coming from the treasurer it’s more than just a worry.