Joe must go: Hockey is harming the economy and undermining the RBA
Joe Hockey has damaged the independence of the Reserve Bank and left the economy in trouble as bad times loom, Glenn Dyer and Bernard Keane write.
Regardless of when Tony Abbott is dumped as prime minister,
Treasurer Joe Hockey should resign, and the sooner the better. He in
inflicting too much damage on the economy and is undermining the
independence of the Reserve Bank.
An independent RBA is — or should be — one of the
Coalition’s proudest economic achievements. It was Peter Costello who
enshrined the bank’s independence, a key component of Australia’s strong
economic performance since the late 1990s. Now it is being damaged by
Hockey. First there was the $8.8 billion unrequested gift to the RBA
shortly after the election, part of Hockey’s effort to claim, in
defiance of the clear advice of Treasury and the Department of Finance
in the Pre-election Economic and Fiscal Outlook, that Labor had left a
hidden legacy of debt and deficit.
Now, this week, RBA governor Glenn Stevens has been brought
in to address cabinet at the very moment the government is falling apart
and the Prime Minister (how goes Abbott, so goes Hockey) is battling to
keep his job. Labor never brought Stevens into cabinet, out of concern
for the impact on the bank’s independence. No such compunction for
Hockey, apparently. Worse, remarkably he sought to claim it was a good
thing, saying: “we invited the governor of the Reserve Bank into the
cabinet, for the first time he’s visited. He has been governor for
years; it’s the first time any government had asked him into the cabinet
room, which stunned me …”
What’s stunning in fact is that Stevens has been used as a political prop by a desperate government.
Kevin Rudd and Wayne Swan, particularly when they were dealing with the global financial crisis, were accused, including by Crikey,
of using then-Treasury secretary Ken Henry as a kind of human shield as
they sought political cover for a bold, but ultimately very successful,
defence of the Australian economy. But Henry was Treasury secretary.
Treasury isn’t independent, nor is it meant to be — it serves the
government of the day. Using the head of the independent Reserve Bank as
a political shield is very different, and it is dangerous to the
independence of the bank.
It also speaks volumes for how out of his depth new Treasury
secretary John Fraser is. Fraser, a former Treasury official who had
been at Swiss bank UBS for much of the past decade, was brought in to
replace Martin Parkinson, sacked by Abbott over the objections of Hockey
as a demonstration of the kind of small-minded partisan bigotry that
seems to drive conservative politicians. Fraser has been completely out
of the Australian economic policymaking loop, especially in the past
three years, when the revenue crunch, a high dollar and volatile terms
of trade have hit the budget and the standing of Treasury’s forecasting.
Far from it being “stunning” that Stevens has never
addressed cabinet, it’s Fraser’s job to brief cabinet about monetary
policy — he sits, ex officio, on the RBA board and attends
every meeting. That’s what Henry and Parkinson did — attend each RBA
board meeting and then return to Canberra (with their briefing notes)
and brief Hockey and his senior advisers, and cabinet if need be,
through the Treasurer. The last thing that the economy
needs — especially as its political leadership is failing — is a
Treasury secretary with training wheels on, which is what Abbott has
And while the government is now leaking that, guess what, revenue forecasts are going to be too high yet again
— despite Hockey and Mathias Cormann’s claim that the days of dodgy
revenue forecasts were over, lines in the sand, etc, etc — the economic
narrative Hockey is trying to sell is blatantly false. Hockey argues
that the government has “unshackled” the economy compared to the Labor
years and that’s a good thing because it now faces international
“headwinds” from deflation and lower Chinese growth. Listening to
Hockey, you’d think he was a canny mariner who’s trimmed his boat down
to deal with the rough water we’re now in.
Wrong. Completely wrong.
It is Hockey via the 2014-15 budget, his senior ministerial
colleagues who have failed to do the basic job of selling it, and the
Prime Minister via a display of political ineptitude so stunning his
colleagues are likely to dump him barely halfway through his first term,
who have clobbered the economy. Consumer confidence is badly down,
non-mining investment is failing to pick up the slack, and economic
growth is in retreat. Business is in despair about the government, and
that’s feeding through into real-world decisions.
That’s why the Stevens and Co decided that, despite record
low interest rates, a highly stimulatory fiscal policy and a dollar well
below 80 cents, they had to try to jump start the economy this week.
And those international headwinds have only just started to be felt, via
commodity prices. The real impacts of global deflation have yet to be
felt, especially with German policymakers still living in their Weimar
Republic-era fantasy world of inflation dragons.
Far from being in top shape in the face of international
problems, the Australian economy is limping badly before the real
challenges hit. And responsibility for that lies with Hockey. At this
rate, even Scott Morrison couldn’t be any worse.