Labor allies bid to sway RBA governor Michele Bullock

Labor alumnus Ross Garnaut pushed the Australian Financial Review to publish an opinion piece demanding the Reserve Bank cut interest rates on an exact day.

Former Labor adviser Ross Garnaut. Picture: NCA NewsWire / Martin Ollman

Labor alumnus Ross Garnaut pushed the Australian Financial Review to publish an opinion piece demanding the Reserve Bank cut interest rates on an exact day, in order to make sure governor Michele Bullock read it before a decisive board meeting.

In the latest example of the ALP and its allies putting pressure on the bank to give voters rates relief before they go to the polls and decide whether to re-elect Anthony Albanese, Mr Garnaut reportedly made the push with the Financial Review’s opinion editor just before the December rates meeting.

The Financial Review reported on Monday that Mr Garnaut demanded his piece – in which he said “the case for an interest-rate cut is compelling”– be published on Monday, December 8, so Ms Bullock and her deputy, Andrew Hauser, read it before they headed into a two-day rates meeting.

The Nine-owned newspaper instead published the piece on the following Tuesday.

Mr Garnaut was Bob Hawke’s economic adviser, and has gone on to counsel and work with Labor leaders since.

The news emerged as the ­Albanese government heads into a challenging election campaign, with cost-of-living pressures and economic management set to be key battlegrounds.

Labor has been pushing back against the independent RBA since August, when Jim Chalmers disputed the central bank’s finding that the economy was running too hot.

The Treasurer in August claimed Labor’s energy rebates were putting downward pressure on inflation despite the RBA clarifying the budget’s key cost-of-living measure would not lead to a faster reduction in the 4.35 per cent cash rate.

In September, former treasurer and Dr Chalmers’ former boss, Wayne Swan, said the RBA was “punching itself in the face” by keeping rates high.

Government ministers on Monday said Australians “deserve” a rate cut and that people were “hoping” for relief.

Stephen Koukoulas, a former economic adviser to the Gillard government and managing director at Market Economics, said the RBA had a “trifecta of results” supporting a rate cut, citing inflation within target, unemployment around 4 per cent, and wages growth between 3.25 and 3.75 per cent.

“We’re in for the period where we’re going to be seeing a series of rate cuts in consecutive meetings,” he posted in a recent LinkedIn video. “The economy is soggy, inflation is low, and that’s why you cut interest rates. They’re currently at an oppressive level, so you need to move them back towards neutral to get a neutral result for the economy.

“If you keep them too tight for too long, the economy gets too weak for too long. So, critical things for the RBA when they are considering their interest rate ­decision is inflation. As simple as that. That December quarter inflation number was lovely and low.”

Australia Institute chief economist Greg Jericho has also urged the central bank to act, writing in The Guardian last month that the RBA has “run out of excuses” not to cut rates.

“Failure to do so would be one of the most political and misguided decisions the RBA would have made in recent history,” he wrote. “To not cut rates now would mean everything the RBA has said it cares about with regards inflation is total mush – just some convenient sounding lines to pacify the plebs.

“The only reasons you could argue the RBA should not cut rates is because you remain annoyed that your claims that government spending was fuelling inflation have been shown to be laughably wrong, or that you just want more people to be unemployed because your twisted ideology demands 4.5 per cent of people always be looking for work.”

Richard Denniss, executive ­director at the Labor-aligned think tank the Australia Institute, warned in January that failure to ease monetary policy risked pushing the economy into ­recession. “The RBA had to act in the form of a rate cut otherwise it risked sending the economy into a recession for a ‘one month or two’ delay in returning inflation to target,” he told Channel 9’s Today program.

The push from progressive economists comes despite others being split over which way the RBA might go on Tuesday, with the money markets factoring in an 85 per cent chance of a cut.

Ms Bullock has previously signalled a cautious approach, warning that inflation risks remain.

Opposition Leader Peter Dutton on Monday said he hoped the RBA would cut interest rates because “Australians need relief”. “I really hope, for the sake of Australians who have had 12 interest rate increases under Mr Albanese, that there is a 25 point cut,” he said.