Jim Chalmers overstepped the mark and the RBA should focus on what’s best for the economy

The RBA should ignore Treasurer Jim Chalmers’ bully boy tactics, and must deliver what’s best for the economy when it meets on Cup Day.

Treasurer Jim Chalmers overstepped the mark when he tried to heavy new governor Michele Bullock to leave the cash rate unchanged on Cup Day. Picture: NCA NewsWire / Martin Ollman

The right thing for the Reserve Bank to do next Tuesday is to leave its official interest rate unchanged – but I’m now almost rooting for a rate hike.

Again, normally I would argue there’s a certain pre-historic preciousness in the way the media

engages in pompous tut-tutting over treasurers commenting on interest rates.

It’s as if they were still living in the world where ties and below-knee skirts were mandatory at good restaurants.

That’s ties for what used to be commonly known as men and skirts for what used to be generally understood to be women.

Let me put those thoughts together.

To my mind treasurers can say anything they like about anything in and around the economy. They are perfectly entitled to look just as idiotic as any member of the economentariat.

However, our current – still, it would appear, trainee - Treasurer Jim Chalmers very obviously, very stupidly, very crudely, and so utterly unacceptably, overstepped the mark a week ago when he tried to suggest/heavy new governor Michele Bullock to leave the rate unchanged on Cup Day.

Critically, that was in the broader context of his behaviour to disrespect the RBA and specifically Bullock - knowingly and quite deliberately leaving Bullock without ‘her Michele’. A deputy.

It’s nearly four months since Bullock was appointed to replace Philip Lowe as governor.

It is much longer than that - arguably all the way back to Chalmers becoming treasurer in May last year – that he had planned for a new governor and a new deputy.

So, his failure to appoint a deputy after such an extended period can only be seen as deliberate.

Most obviously, Bullock goes into next Tuesday’s meeting without both the support, and what is always the case, the supporting vote of a deputy.

But the damage to her is much greater than that. A deputy plays a crucial role in the formulation of both the analysis and the policy (rate) recommendation to the board.

Further, Bullock also lacks an economics department head with the departure of Luci Ellis mid-year to Westpac. Ellis, incidentally, has swung to calling a rate hike next Tuesday.

So, to my opening lines: a rate hike would make a very definitive statement that we - both the royal ‘we’ for Bullock and the collective ‘we’ for the board - will not be bullied.

But I immediately add that Bullock and the board won’t play Chalmers-style child-like games. Next Tuesday, they will be deciding on the merits as they see it, without fear or favour.

To stress, that’s eight votes; not a governor as dictator. Only a sole persuader.

As I’ve explained, the board papers which go to members today will have detailed arguments for both a 25-point hike and a pause, continuing the analytical and discussion practice initiated by Lowe earlier this year.

But it will have one recommendation from Bullock - I believe, the pause.

If so, it will be supported by clear analytical assessment that the September quarter inflation kick-up did not “materially” change the predictions for inflation at end-2024 and both mid and end-2025.

Originally published as Jim Chalmers overstepped the mark and the RBA should focus on what’s best for the economy