Terry McCrann: Treasurer ‘heavying’ RBA boss? It’s the other way around
Anyone suggesting Josh Frydenberg is trying to bully Philip Lowe has their wires crossed, writes Terry McCrann
Terry McCrann
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Any suggestion that Reserve Bank governor Philip Lowe compromised his or the RBA’s independence with his ‘meet and quote’ with Treasurer Josh Frydenberg last week is just silly and quite simply doesn’t square with the facts.
Indeed, this should have been shown most precisely by parallel events taking place across the Pacific, almost in parallel real time, between their two counterparts — or more precisely, ‘semi-counterpart’ in the case of Frydenberg.
That’s Fed head Jerome Powell and President Donald Trump.
Very simply, over there, the President is trying to bully Powell into cutting interest rates.
Very obviously, Lowe hasn’t needed to be bullied by a politician into cutting rates — he and his board have already done so, twice.
And just to make it very clear, they did so entirely on their own initiative; they had not been ‘asked’ by the Treasurer, or even indeed the PM, to do so.
But somewhat more subtly — maybe too subtly for much of the media and other so-called commentators — is that, if anything, the dynamic has been and is operating in exactly the opposite direction.
Rather than government and/or Treasurer trying to ‘heavy’ Lowe and the RBA; it’s been the mild-mannered governor who’s been trying to ‘heavy’ (a better and more accurate word would be ’advise’) not so much the government but governments, plural, and politicians plural.
Lowe has been calling for governments, state and federal, to increase their spending on infrastructure, to embrace a much wider, deeper and more sophisticated and nuanced ‘reform agenda’, and to broadly boost, again in an intelligent way, fiscal (budgetary) action.
And he has been doing so, progressively, for some months. And presumably when he started, that message was intended more for an incoming Labor government.
Those calls have been built on three foundations.
Statements of assessment of what is happening in the economy, the RBA’s considered opinion of what would make the economy work better and deliver stronger growth and rising incomes, and an admission of the limits of what the RBA can achieve by cutting rates.
Those limits are two-fold.
First, what cutting rates can achieve at any time — they can’t deliver in themselves the productivity gains that are needed to boost growth and incomes on a sustainable basis. And the basic fact that with the RBA rate down now to just 1 per cent, he ain’t got much left to cut anyway.
The comparison — of exactly the opposite circumstances — with the US will get even more potent, if not in two weeks, in two months.
President Trump has been demanding that the Fed cut. In two weeks the Fed could well ‘bow’ to that demand by cutting at its next meeting.
If it doesn’t do it then it would most likely do it at the next meeting six weeks later.
In truth, the Fed is actually ‘bowing’ more to Wall St than to the President.
Powell has shown himself to be exactly the same as his three predecessors — all of them have been terrified of ‘causing’ a market meltdown.
But no doubt the President will be quick to claim the credit and, in his usual Trumpian way, magnanimously thank the chairman for being sensible and doing the right thing. He’ll probably even add that as a consequence he won’t sack him, at least not this year.
Ask yourself: what could the RBA do which either Treasurer or PM could take credit for, far less claim that Lowe was acting, so to speak, on their instruction? The answer is: absolutely nothing.
And again, if anything, it could unfold the other way: Lowe being able to ‘thank’ the pollies. Although that would be no thanks to Anthony Albanese, Jim Chalmers and the Labor rabble.
We have already seen this on both levels, with the delivery this month of the tax cuts.
When those are added to Lowe’s two rate cuts, the regulatory changes which have made property lending more attractive and the non-election of a Labor government, the economy’s now received a very substantial boost.
I’m not sure Lowe’s actually referenced the last of those — the non-election. But again, if he had, it would not be a political statement but just a statement of analytical fact.
Simply, that the economy is not getting the raft of tax hikes proposed by Labor, which would run counter to his and the RBA’s analysis and ‘advice’.
There are two broader points about all this. It is entirely proper that the Treasurer and the RBA governor meet. Indeed, the more pollies he meets the more often the better.
Critically, the RBA — without giving it some aura of great policy or even analytical wisdom — is a source of substantive and importantly independent analysis and advice. It is especially importantly independent of Treasury (and its Canberra ivory tower).
Indeed, over the decades I’ve been staggered at how PMs and treasurers have not availed themselves of this extraordinary, useful resource.
A BULLY AND HIS PULPIT
More than 100 years ago president Teddy Roosevelt —that’s Teddy, not his more well-known cousin (and opposite party) wartime leader FDR — coined the term “bully pulpit”.
That, as president, he uniquely had a powerful platform to advocate an agenda — considered essentially by all subsequent presidents as (gently) bullying in a good cause.
But bizarrely, more than two years into his presidency, I have yet to see anyone — even, especially, the Trump-hating ‘usual suspects’: 98 per cent of US and indeed global media — make the point that the country now actually had a real life bully using that proverbial ‘bully pulpit’.
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You would have thought it was such an obvious free kick; and kick again and again and again.
But the equally obvious conclusion is that most media in 2019 wouldn’t have a clue; in the era of the smart-phone their knowledge of ‘history’ goes back 24 hours, or maybe 48 hours at a real stretch.
Of course, I would be most happy to be contradicted. But I’m not holding my breath.
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