Leftist call to kneecap the RBA on interest rates
The Greens have demanded Labor intervene in monetary policy and overturn an August rate hike, triggering warnings the minor party would end of the era of Reserve Bank independence.
The Greens are urging Jim Chalmers to muscle-up to the Reserve Bank and override any decision to lift interest rates in August in a major attack on the institution’s independence, with the minor party arguing that cash-rate decisions are inherently political.
Labor’s budget strategy was also pilloried, as Greens Treasury spokesman Nick McKim argued it was “grossly distasteful to watch a Labor treasurer trumpet a budget surplus when so many millions of Australians are skipping meals, unable to pay their school fees and unable to pay their power bills”.
“There’s just no way that Australia should be running a surplus,” he said. “Our attention should be on doing more to help people who are doing it tough over the long term. Of course, we’re open to surplus budgets when the times permit.”
Senator McKim said it was incumbent on the Productivity Commission to conduct a “lock, stock and barrel review of the privatisation agenda over the past 50 years”, and he was “not going to rule out” the Greens backing greater government control over key parts of the economy.
In an exclusive interview with The Australian as part of a series exploring the Greens’ policy platform, Senator McKim said the government could reduce demand in the economy and help tame inflation by introducing “a corporate super profits tax”.
This would raise “significant extra revenue” and the Greens would “unashamedly use that revenue to help people who are really doing it tough, but also to fund a transition in our economy … to see us out of fossil fuels and into renewables.”
The minor party would campaign to “significantly” increase JobSeeker and other income support benefits, with Senator McKim saying that “poverty was a political choice”.
He said the Greens would set out “what our fiscal parameters are” closer to the election.
Senator McKim also clarified the Greens would not support cuts to the National Disability Insurance Scheme, expressed caution about Labor’s Future Made in Australia agenda and blasted current levels of government funding for “extremely wealthy private schools”,
But his most forceful comments related to the Reserve Bank, with Senator McKim warning another rate increase in August would be the “straw that breaks the camel’s back for a lot of Australians”.
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Extreme Greens call to kneecap the RBA
The Greens have demanded Labor intervene in monetary policy and overturn an August rate hike, triggering warnings the minor party would end of the era of Reserve Bank independence.
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Greens’ plan would hurt those the party is seeking to help
Nick McKim’s call for Labor to overturn a future RBA rate hike reveals the Greens as a party of grandstanders, keen to win over disaffected voters on radical policies that can never be implemented.
He said Dr Chalmers should “absolutely” overturn another rate hike in August under section 11 of the Reserve Bank Act which “provides the power for the Treasurer to override decisions made by the board of the RBA, including decisions on interest rates”.
“The mechanics of section 11 are that the treasurer can advise … the governor-general that is, to issue an order to the RBA board. And the RBA board has to comply with that order,” Senator McKim said.
“Dr Chalmers … should be making it very clear to the RBA that he is prepared to use section 11 to overrule them if necessary.”
He also made a broader argument that Australia’s economic frameworks were “not fit for purpose”, and challenged the shift towards central bank independence.
“We live in a democracy and ultimate accountability should be with people who have direct accountability to voters,” he said. “Economists won’t argue that government should relinquish the levers on tax policy to an independent commission like the RBA.
“I will make the point that the RBA’s decisions are political decisions. They might claim that they’re not political and certainly they don’t have a direct accountability to voters as governments do. But they are making political decisions to put interest rates up and they are political because they impact most Australians,” he said.
Judo Bank chief economic adviser Warren Hogan said Senator McKim’s position “overriding the bank would spell the end of independence of our central bank”.
“The pain of the broader community, the financial stress, is originating from inflation and not from interest rates,” he said. “The reason we have independence is that there is an inherently technical nature to monetary policy and the setting of short-term interest rates needs to rise above politics.”
He said interest rate decisions required highly trained economists to make “judgments about the appropriate setting for monetary policy”.
“If you overlay a political framework on that, they became almost impossible to make the right decision,” he said.
“It’s the fundamental question that our community has been struggling with for some time now: and that’s about our capacity to undertake short-term sacrifice for long-term gain.
“We are struggling more and more every day in our public policy to undertake that trade-off.”
The government has proposed a series of reforms to the RBA, including a planned repeal of the veto power in section 11 of the RBA Act which has never been used. This was a key recommendation of the independent review that was commissioned by Dr Chalmers and delivered to government in March 2023.
Senator McKim has opposed the government’s reforms and the removal of the veto power as a “breathtaking attack on an essential democratic safeguard”. The Coalition has also rejected the central bank revamp because it is concerned Dr Chalmers could stack a new specialised monetary policy board with its own hand-picked appointments.
“He (Dr Chalmers) wants to remove section 11. And that’s not supported by the Greens and, so far, hasn’t been supported by the parliament,” Senator McKim told The Australian.
“We … absolutely believe section 11 should remain in the act.”
Asked where the drivers of economic growth would come from under the Greens’ policies, Senator McKim said he was “not going to be lectured to on economic credibility by a bunch of neo-liberals who have been busy cooking the planet”.
“Many of the current drivers of the Australian economy – for example, our agriculture sector – will fare extremely well under the Greens. And a lot of our economy will fare better under the Greens because we’re not going to (be) beholden to particular corporations that donate to us.”
Addressing the issue of whether ongoing budget deficits would deepen intergenerational inequity, Senator McKim said “our primary intergenerational responsibility is handing on a liveable planet to future generations”.
“If we don’t address those problems, then issues like budget surpluses will become secondary to day-to-day survival for humanity … Humans are part of an ecosystem and if the ecosystem collapses around us – which it is in the early stages of doing – then all bets are off.”
To balance the budget over the long term, Senator McKim said the Greens would target major corporations and billionaires.
“That money is there for the taking,” he said.
“What people will see from us is a Robin Hood platform.”