Chalmers’ election spending and bank reform promises hard to deliver

Treasurer Jim Chalmers’ promise not to engage in a pre-election spendathon with inflationary giveaways is both necessary and commendable but pardon us for being sceptical about such word of honour.

Treasurer Jim Chalmers commissioned an independent review of the Reserve Bank.Credit: Alex Ellinghausen

Experience suggests if Chalmers is as good as his word, the Albanese government would be the first to do that in living history.

Speaking on the Inside Politics podcast, Chalmers said the looming mid-year fiscal update and an expected March budget would be focused on keeping inflation under control and dealing with global and domestic economic challenges. He intended to do that by continuing to be responsible with budget spending, noting inflation had fallen from 6.1 per cent to 3.8 per cent since Labor took office.

“Our judgments about the economy have been right the last couple of years, and that’s because we’ve prioritised good economic decisions over political decisions. And people can expect that even in the context of an election,” Chalmers said, with not even a nod to the part played by his predecessor Josh Frydenberg in shaping the economy he inherited.

But with the opposition already whinging about government spending, it is salutary to recall Scott Morrison’s massive spurge of money and promises as his popularity dimmed as the 2022 federal election approached.

Federal spending has been averaging almost 2 percentage points higher than before the pandemic, but fortuitously huge revenue windfalls have prevented a budget blowout and allowed the Albanese government to tread water on ambitious tax, industrial relations and regulatory reform agendas.

But the first meaningful reform is in the wings.

On coming to office, Chalmers commissioned an independent review of the Reserve Bank which has recommended major changes including a separate interest rate setting committee, dominated by people who would have expertise in areas such as “open-economy macroeconomics, the financial system, labour markets and the supply side of the economy”.

The review also plumped for a separate governance board to oversee the bank’s organisation strategy, performance, finances, large projects, resourcing, staff pay, succession planning, risks including cyber risks, and the delivery of the nation’s banking and cash services. Chalmers will have to appoint almost an entirely new board to run the RBA and oversee its operation, including protecting the nation’s payment system from cyberattacks, under the deal he hopes to strike with the Coalition to reform the institution.

The opposition has raised fears that Chalmers would “stack” the monetary policy committee with people who lacked the experience or ability, arguing that all members of the current board go on to the new committee. Chalmers said he was prepared to make such concessions.

“This is about strengthening and modernising the Reserve Bank in the most bipartisan way,” he said.

The legislation results from the first independent review of the Reserve Bank in 40 years. The opposition should support it and allow Chalmers to make good on his promise to have the changes in place by the start of next year.

It’s more achievable than his other promise not to splurge on a pre-election spendathon.

• The Opinion newsletter is a weekly wrap of views that will challenge, champion and inform. Sign up here.