After politicising institutions like the defence forces, the Federal Police and the federal public service, has John Howard now managed to ensnare the Reserve Bank in his web and turn it, too, into a public political animal?
How else do you explain the unprecedented publicity from within the inner core of the RBA, as spelt out in these two significant stories in the past two days?
First came the sight of two RBA directors, led by the respected financial markets expert Jillian Broadbent, denying any split over Tuesday’s decision to leave the official cash rate unchanged – as the SMHreported yesterday.
And today, the Herald has this far more significant story, Reserve feared it was used as election pawn, written by Matt Wade and the paper’s well-connected national affairs writer Peter Hartcher. It’s a potentially explosive story:
The Reserve Bank was sufficiently concerned about the Coalition’s election campaign claims about interest rates that it asked the Australian Electoral Commission to investigate.
Voters, angry that some of the campaign claims were false and misleading, sent some of the Coalition’s leaflets to the Reserve Bank and asked it to refer the material to the electoral commission.
The Reserve Bank, the authority charged with setting official interest rates, was deeply uneasy at the intense politicisation of rates, but it remained silent throughout the election campaign for fear of further politicising itself, officials said.
However, the central bank believed that some of the material in the Coalition’s campaign leaflets was exaggerated and that some was factually wrong, the officials said.
However, the bank concluded that it was the role of the electoral commission to police election campaigns. Reserve Bank officials referred the Coalition’s leaflets to the commission during the six-week campaign and asked whether they breached any regulations.
The commission responded that it was unable to take action to halt a political party making policy claims or predictions even where they might be false and misleading, the officials said.
Hartcher further added to the story with this opinion piece in the SMH’s op-ed pages, “No interest in the PM’s pressure“, which had ’inside briefing’ written all over it.
And in today’s Financial Review there’s an interesting letter from VJ Carroll of Paddington on the issue of the composition of the RBA board. Vic Carroll is the former editor and editor-in-chief of the SMH and the AFR, and still one of the sharpest financial minds in the country.
He makes the point that this week’s comments by RBA board members Jillian Broadbent and Warwick McCubbin after the decision to leave rates unchanged were highly unusual, concluding that the “role and composition of the RBA board is becoming a major issue.”
If these stories and the events of the past two days are any indication, the Howard Government’s attempts to politicise the RBA s becoming a major issue.