A new era for the Reserve Bank — or, why the ‘productivity debate’ is so ridiculous

Today marks the start of a new era at the Reserve Bank, with an array of reforms introduced in the wake of the government’s review of the central bank, commencing with the first two-day meeting of its board. This will be followed by a media conference tomorrow, along with the usual post-meeting statement, plus various smaller changes like the earlier release of the quarterly statements of monetary policy, hitherto released the Friday after a meeting, with the relevant meeting statement teasing various forecasts as if to excite the monetary cognoscenti.

The meetings will be two days long, but there’ll only be eight of them a year, rather than 11 day-long (or, rather, morning-long) meetings. Sixteen days a year to produce our monetary policy, compared to 11. Or, explained in another way, a 45% decline in productivity. Not to mention the extra cost of the additional day’s meeting for the Reserve Bank board, and the expense of the new monetary policy board as well, with travel costs and fees.

When talking about productivity, you can measure outputs like monetary policy statements — but what about outcomes? If you compare the performance of the US Federal Reserve to that of the Reserve Bank, you’d see the US economy in such a Goldilocks state that even right-wing commentators are talking about how good the jobs data is there — versus Australia where the labour market remains tight but consumer spending and economic growth have been clobbered by successive rate rises. Which bank has been more productive?

Running monetary policy is a service, and services are automatically less amenable to output-based measurement than producing goods — and the story of the past 40 years here and across the West has been the rapid growth of services compared to manufacturing and other industries highly amenable to output-based measurement. In recent decades, the story has been of the rapid growth of services where output-based measurement is the very antithesis of productivity. Stuffing our classrooms and childcare centres full of more kids per adult, forcing aged care workers to care for more people per hour, making nurses work longer shifts to cover for sick colleagues — doing this destroys what we want delivered by those services.

The Reserve Bank and its tyro governor Michele Bullock keep banging on about wages growth without productivity growth. We’ve been having a “productivity crisis” for half a decade now, with the debate never shifting from the ritualistic calls for tax cuts for business and industrial relations deregulation, with minimal recognition that we’re no longer talking about an economy dominated by how many widgets can be produced and assembled per hour.

But not all services are equal — certainly, few are as equal as health and social caring. Another thing that has proliferated in recent decades is a variety of service jobs that add little or no value — advisers, lobbyists, middlemen and women, middle managers, ticket-clippers, intermediaries, the beneficiaries of outsourcing the stripping of expertise from both the public and private sectors. Many of these are “bullshit jobs” that in turn make extra demands on people doing real work, or make that work harder to complete.

A particularly noxious form of bullshit job is management consulting, especially in the public sector, involving expensive advice to senior managers about how to restructure organisations, processes and internal systems in order (notionally) to increase efficiency. Much of this “advice” is the simple repackaging of what was fashionable a decade ago and which has temporarily fallen out of favour in the face of new trends — trends that themselves will return to life some years hence in an endless cycle of non-advice that makes money for consultants but inflicts costs and disruption on the luckless “beneficiaries”.

The changes to the RBA smell of that kind of pointless managerial recycling. It’s not so much that the RBA and its board will be less productive, but that the changes represent a whole ethos of non-productivity.