Charles Wooley: Jim Chalmers playing blame game on economy

The rising cost of living is hurting everyday folk — voters — and making the government nervous as election looms, Charles Wooley writes.

Federal Treasurer Jim Chalmers. Picture: NewsWire / Martin Ollman

Picking sides.

This week began with Jim Chalmers channelling his hero Paul Keating, declaring the Reserve Bank of Australia was “smashing the economy”.

It was strong language to use given the historically delicate relationship between treasurers and Reserve Bank governors. Whether appearing to blame the present governor Michele Bullock was fair or not is subject to much political and economic argument.

Asked the obvious question on morning television, “Is this an attempt to shift the spotlight?” the treasurer gave the obvious answer, “I think it is self-evident that interest rises are slowing our economy,” he said.

With just a touch of Keating, Chalmers reckoned “it would be strange” if as treasurer he couldn’t explain the soft economic growth of 0.2 per cent, the lowest since the early nineties recession.

Jim didn’t declare like Keating that we were becoming “a Banana Republic” because we don’t need to be reminded of another lost referendum.

Paul Keating. Picture: John Feder

But he had successfully pointed the finger of blame while denying any rift with the RBA.

He said insouciantly that the government was working “closely with the Reserve Bank.”

You’d like to be a fly on the wall whenever the two sides are working closely.

In the golden age of Menzies, eighty years ago, the government retained its wartime powers to set both the value of the Australian pound and interest rates until 1959 when the Reserve Bank of Australia was established.

Menzies had a dream run with his hands on all the economic levers and it seemed to work. Manufacturing in Australia (back when we actually made things) rose from 489 million pounds in 1949 to 1843 million pounds in just ten years.

The government could take the credit. And of course, the blame when things eventually went bad.

But leading up to an election what government wouldn’t love to control interest rates?

And if you can’t do that all you can do is try to spread the blame as Chalmers effectively did this week.

Judging by talk back radio in Sydney and Melbourne the strategy was working, with the average punter appearing more on Chalmers'’s side. And not at all well disposed towards Governor Bullock.

John Howard, who had the best attuned political antenna of any PM I have ever known, was a great believer in understanding the national mood from listening to 2UE and 3UZ. Back in 2007 when the Reserve Bank raised interest rates to 6.75 Howard could feel the pain and see the trainwreck coming.

Former Prime Minister John Howard was a great believer in understanding the national mood from listening to 2UE and 3UZ. Picture: Leon Georgiou

He not only lost government but unusually he lost his own seat of Bennelong and worse, to an ABC journalist.

Interest rates today are 4.35 (as if you didn’t know) and it is interesting to speculate in our massively over-borrowed nation what is the cut-off point beyond which no government can survive.

I wonder if the Reserve Bank board members have considered that if they raised the rate to 6.75 they would almost certainly see off a turbulent treasurer.

Don’t write in. I was joking.

Those of us who are not economists can only adjudicate what seems reasonable and what seems unfair.

The Reserve Bank board must seem to most people to be remote and indifferent to the general suffering. The board might say “we feel your pain” but we know they can’t really.

They might sympathise but they are not scratching to pay the mortgage and the bills. Most are independently wealthy and have other jobs. For the RBA side-hustle the eight members meet eight times a year and seven of them collect $82,960.

To be fair the job must involve a load of homework.

Meanwhile for the eighth member, Governor Bullock, her role is a full-time job with a base salary of $890,252 per year, plus a superannuation contribution of $115,171.

And depending on how things go, possibly a mountain of grief.

Governor of the Reserve Bank of Australia (RBA), Michele Bullock. Picture: NewsWire / Martin Ollman

Still to mere mortals the remuneration seems like a giant heap of moola.

But compare that with the people who profit from rising interest rates, the CEO’s of the big four banks. Those bank bosses are in the wages stratosphere.

The big four chiefs can earn as much as $7m a year while Jim Chalmers, who supposedly runs the economy, languishes way down the pile at around $325,000 a year. A mere pittance.

Even Albo’s pay seems modest at around $600k.

Australia’s big four banks have reported profits of $32.5 billion between them, much of that driven by rising interest rates.

Clearly not everyone in Australia is feeling the pain.

A rabble rouser leader of an opposition party might surge to power on such apparent inequity. But we don’t have one of those. The Libs might alarm us about immigration and national security but as the nominal party of private enterprise they are hardly going to attack capitalism.

And neither will the Labor Party.

Both seem bound to accept the prevailing doctrine of the dismal science of economics, that in order to have a healthy economy you need to have a four to five per cent unemployment rate to keep wages growth under control.

And you need to push up interest rates or cut spending to slow down the economy to achieve this magic number.

Hardship for everyone but our rulers. That is the accepted cure. It is as unquestioned as was bleeding in medieval times.

Remember Keatings “recession we had to have”.

There is a political problem: the people who are hurting in this cruel paradigm are all voters.

And voting is compulsory.

This week the fallout for the government as a result of seeing no end to the pain of economic orthodoxy has been politically unpleasant in the short term. Longer term with an election looming in the new year and with the treasurer’s hand not on the lever, it might be politically disastrous.

This week it must have occurred to Jim Chalmers how Bob Menzies, “Ming” as he was known, had it so much easier and perhaps why Ming’s dynasty lasted for an unrivalled sixteen consecutive years.