Labor wants a trailblazer to lead the RBA, while shifting the blame for pain to Philip Lowe
Jim Chalmers describes the appointment of the next governor of the Reserve Bank as a “big call” so you can bet the Albanese government won’t be taking avoidable risks.
Paradoxically, the safest technical option for the Treasurer to fill what he calls a “big job” would be to extend Philip Lowe’s tenure for another three years, as Labor did with Glenn Stevens in 2013 and the Coalition did with Ian Macfarlane in 2003.
That would be a brave decision, Minister, perhaps even courageous, as it would mean Labor explicitly endorsing all that has occurred on Dr Phil’s watch in recent years.
The opposition’s intervention on Wednesday, however, was the kiss of death for the governor.
Lowe may possess the “steady hand” of continuity but in cold, hard Canberra terms that’s because the life blood isn’t reaching his extremities.
He may be the outstanding public-sector economist of his generation, a lucid communicator and a man of colossal public spirit, but the flame on his torch has been blown out by politics, interest-rate policy mistakes and the RBA’s pitiless assault on borrowers to rein in inflation.
Chalmers is a political striver, on the up escalator, so he’ll want to keep the ACTU comrades happy by seeing off a governor that organised labour has reviled and vilified for his take on wage outcomes and inflation.
As well, if the Treasurer can shift the blame for the mounting financial pain on households to the “independent central bank” and its leader, it also makes sense to draw a clear line under the Lowe era.
Plus, the review Chalmers ordered into the RBA practically demands a person without the heavy baggage of the central bank’s recent past: the botched forward guidance, the bond buying program, the overkill on monetary stimulus.
Like any minister, Chalmers is forever on the hunt for trailblazers.
Appointing the first woman to lead the RBA – with deputy governor Michele Bullock and Department of Finance secretary Jenny Wilkinson both excellent candidates for the top job – would be a milestone Chalmers would carry forward with pride into his career.
Central banking is not for the faint-hearted nor the show pony; it’s technical and dreary, but the stakes are immense, and the free rein the RBA has been granted warrants the scrutiny and accountability that attends its every move.
Frankly, who’d want all that for a mere million bucks a year!
Chalmers is fortunate that the leading candidates are all proven econocrats, creatures of the official family of policy advice. Any of them will hit the carpet at Martin Place and feel at home.
Giving speeches to the policy class and market participants and chairing board meetings will be a doddle for the seasoned secretaries and sundry deputies in the frame for promotion.
But in the coming iteration of monetary policy, the governor is going to be required to provide more face time to popular media, financial markets and the public.
The RBA review called for fewer board meetings (eight rather than the current 11) and a press conference to explain every monetary policy decision.
This won’t be like fronting up to Senate estimates or the house economics committee, as all the local candidates have endured to various degrees, but more like wading through the mosh in the Long Room at Lord’s after their torrid morning spell on the vino.
For all its highlighted flaws and missteps, and the review’s call for a refresh of operating systems, culture and decision-making, the RBA is a respected, able and solid institution.
It doesn’t quite run itself yet whoever leads it after Lowe’s term ends in September inherits a great base for enhancing the RBA’s performance and maintaining, all things considered, the long-run success the bank has had since it was unshackled from pollies a generation ago.
More daunting than the organisational makeover for the incoming governor is navigating the ever narrowing path of returning inflation to target without tipping the economy into a deep recession. That’s an even bigger task than Labor’s job selection call.
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