When does a media outlet judge an important story not to be an important story? When it appears as a scoop in a rival media outlet.
Exhibit 1: the way Fairfax (who got the scoop) seriously treated this week’s call by six well-respected economists for a new inquiry into the financial system, while and News Limited (who didn’t get the scoop) almost totally ignored or dissed the story.
This isn’t a partisan or ideological issue. The economists hail from across the political spectrum. The issues they raise go well beyond the simplistic Left-Right debates that have marked much of the commentary on the economic crisis. While John Quiggin and Nicholas Gruen are perceived to be from the Left, the likes of Christopher Joye and Sam Wylie are not exactly bomb-throwing socialists. All are widely-respected. And all, contra Terry McCrann (and more of him in a moment), are influential.
Gruen is chair of the Government 2.0 Task Force; Stephen King was an ACCC commissioner. Quiggin is a world-class academic researcher. Wylie (who incidentally used to work for ASIO), is a former Dartmouth professor and a Senior Fellow of the Melbourne Business School. Gans and Joye were responsible for convincing the government to invest $8 billion in the securitisation market last year. Joye ran John Howard’s home ownership task force and has been a frequent op-ed contributor to The Australian. If they’re not influential, I don’t know who is.
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And Ian Harper, a member of the Wallis committee and still a pin-up for the Right, lent strong support for the idea.
But, perhaps because the economists gave Fairfax papers the drop rather than News Ltd, the letter was barely covered by the latter. Jennifer Hewett, while barely mentioning the letter, attacked the “people’s bank” idea, as did John Durie.
The “people’s bank” proposal was one of fourteen issues raised by the economists, and the letter does not recommend the idea (although John Quiggin in the past has been a strong advocate).
And then there was Terry McCrann, who launched a vitriolic attack in the Herald Sun involving obscure allusions to can openers, a critique of the “people’s bank” proposal (again), and the argument that there was no problem with the current financial system that merits any sort of inquiry.
Quite which part of the banking oligopoly, or the punishingly high interest rates faced by business, is not a problem in the view of McCrann?
The McCrann logic seems to be that because Australia dodged a bullet from last year’s financial crisis we can dodge the next one with equal skill — with a financial system grown even more cartel-like in the interim.
Joye told Crikey he was bewildered by an “evidently coordinated News Limited attack.”
“It appears to be a case of expedient and ideologically motivated journalism that has manufactured an utterly artificial strawman to tear to shreds — the ‘People’s Bank’ that we never endorsed nor described as such,” he said.
“I was very disappointed with their coverage of this matter and have written directly to Jennifer Hewett and Chris Mitchell communicating this fact.”
But we might look at Martin Place for the real motivations behind McCrann’s attack on the economists. It has long been considered, including by market analysts, that the Reserve Bank — notionally committed to greater transparency — has a handful of commentators such as McCrann and the AFR’s Alan Mitchell “on the drip” regarding interest rate recommendations to the RBA Board. This enables them to appear to accurately anticipate interest rate movements. In return, the RBA gets a sympathetic ear in the commentariat — useful when you’re holding interest rates too high, for example, as the Bank did early last year.
The RBA may have encouraged McCrann in his attack. Or, possibly, McCrann merely acted in the way he thought his RBA information partners would have appreciated.
But Crikey understands that senior RBA figures consider that the economists’ letter raises a number of interesting ideas and that there is a case for a review of the financial system — although, in their view, now is not the time for it, given the Government is still wading through a number of other major reviews and has the Henry tax review arriving at the end of the year. Further, one senior bank official indicated that they hoped policy-makers would listen to the case made by the economists.
There appear to be splits within the RBA itself over some of the issues raised by the economists. Governor Glenn Stevens and Assistant Governor Phillip Lowe are not opposed to the idea of the RBA “leaning against” asset-price bubbles. But Assistant Governor Guy Debelle, in a speech in Brazil in May, savaged the concept. Debelle and Lowe are the two primary internal candidates to succeed Stevens.
There is nothing but opposition in the RBA, however, to a publicly-owned bank of any kind. And the economists might have erred in providing such an obvious hook for attacks like those of McCrann, who used it to ridicule the entire letter — although it is hard to see how they could have downplayed the proposal any further than they did in the letter, where it got 42 words out of 1700.
The fact that Australia’s financial system emerged relatively unscathed from last year’s ordeal by fire doesn’t reduce the case for an inquiry, it strengthens it. Unlike the Americans and the British and others, who are overhauling their financial systems in the heat of battle, Australia has the luxury of being able to take a step back, look at what went right and wrong, and try to ensure we can deal with future challenges.
Too bad some in the media apparently aren’t up to that kind of debate.