Outgoing Reserve Bank governor Ian Macfarlane is settling a few scores and revealing plenty of secrets in his round of farewell media interviews, but the Labor Party has every right to feel aggrieved that he didn’t speak out during the 2004 federal election campaign.

The Governor has confirmed once again on Sunday Profile that he did feel John Howard ran a deceptive scare campaign on interest rates that suggested the RBA wasn’t independent. It was indeed the biggest lie of the campaign and he was the independent officer uniquely placed to set the record straight.

So why didn’t he speak up? After all, he’d already hammered out his three year contract extension which Peter Costello announced on 29 July, 2003. He couldn’t be sacked and he didn’t want another term anyway.

Maybe it was the intimidation of having a board stacked with Liberal Party mates such as Hugh Morgan and Rob Gerard. Of course, Peter Costello’s Treasury Secretary, Ken Henry, also sits on the board and reports back to his political masters.

A more likely scenario is that such an intervention would have cruelled Macfarlane’s chances of having his deputy, Glenn Stevens, succeed him. All of these frank and controversial comments have only surfaced after Stevens scored his five year appointment on 1 August.

Kim Beazley is right that Macfarlane’s comments on interest rates are “pure political gold”, but the 2004 campaign was only really a proxy for “economic management”. Stand by for next year’s Howard scare campaign to be based around unemployment, because it will tie in nicely with Labor’s own scaremongering on WorkChoices.

The other interesting aspect of last night’s Sunday Profile interview on the ABC was Macfarlane’s claims about a deal with John Howard and Peter Costello to hint at an interest rate rise during the Asian economic crisis.

It confirms once again how much monetary policy relies on spin, perceptions and sentiment – even if markets and the public are taken for a ride sometimes. Looking back at the Asian contagion, you have to congratulate Macfarlane and the government for not falling into the trap of jacking up interest rates or spending billions of foreign reserves shoring up the dollar. They simply held their nerve, conspired to manage expectations and steered through the situation well.

Peter Fray

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