The economics wonks may be applauding the comments of outgoing Reserve Bank boss Ian Macfarlane – but Sir Humphrey would be pleased , too.
Yesterday Macfarlane told ABC Radio’s Sunday Profile he was “disappointed” with the Government’s approach to interest rates at the last federal poll. He said the slogan “Keeping interest rates low” implied that the Government would do so – and that it had control of interest rates.
Yet he added “It was disappointing to us because the bold claim, rather than the more nuanced one, was probably accepted by some members of the community. If they accepted the bold claim, that indicated that they weren’t aware that we had an independent central bank. There was no way that I could speak out without effectively becoming a third force in the election, and that would not have been in the long-term interests of the Reserve Bank or Australian monetary policy at all.” Such fluent bureaucratese!
A few weeks ago we observed in Crikey how Ben Bernanke and the board of the Fed don’t get pushed about by pols in the way the members of the RBA board do. But we’ve also been talking about FOI and insights into decision-making. So while Macfarlane is enjoying his moment in the sun, let’s all please remember that here there is no disclosure of Reserve Bank minutes and of who voted which way – while everything is on the table in the US.
Macfarlane says interest rates will rise again. And who will be making the decision? The board of the fed is stacked with rocket scientist economists. In Australia we go for business people with “real life experience”. This couldn’t be code for jobs for the boys, could it? And if the biggest economy on the planet avoids businesspeople, what does that tell you?
Take the example of RBA board member and Woolworths CEO Roger Corbett. As a member of the RBA board, his responsibility is to manage inflation. Over at Woolies, his responsibility is to maximise shareholder’s returns.
When the Reserve raises rates, Woolworths gets hit – but we don’t know how Corbett votes.
Our friends over at Henry Thornton are older and more experienced than we are. And here’s just some of what Peter Johnson had to say there on Reserve Bank transparency:
The Reserve Bank should be far more forthcoming about its thinking about the economy. It should explain its views after each meeting of the board and minutes of meetings of the board should be released (with some delay) after each meeting of the board. This will improve policy-making as well as providing a more fully and fairly informed market.
Much better than hoping the governor lets some beauties drop while they’re halfway out the door.
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