No government institution is entirely at arm’s length, but an intervention by Jim Chalmers would likely be calamitous
Senator Nick McKim, the Greens’ economic spokesperson, whose party says they will not support RBA reforms until or unless interest rates fall.Senator Nick McKim, the Greens’ economic spokesperson, whose party says they will not support RBA reforms until or unless interest rates fall.The Greens may bristle at the comparison, but their demand for the treasurer, Jim Chalmers, to order the Reserve Bank to cut interest rates now is Trumpist.
Part of the reasoning is that mortgage holders “are getting smashed right now”, McKim said, echoing Chalmers’ own words. The intervention powers already sit with the treasurer and cleaving the cash rate would end “the pretence that the RBA is independent”.True, no government institution is entirely at arm’s length. The treasurer gets to name the governor and the government-appointed treasury secretary sits on the board.
Financial markets generally brushed off such a threat to the world’s biggest debt mark of a self-proclaimed billionaire business figure claiming to know more than Fed economists and officials. Then again, those concerns might be rekindled after Republicans’ anger at last week’s Fed rate cut – For Australia, an open economy dependent on international trade and financial flows with a floating currency, an intervention by Chalmers to overrule the RBA would likely be just as calamitous.Gareth Aird, the head of Australian economics at the CBA, the country’s largest bank, said the effects would be “massive” and long-lasting.For the past three decades, Australia had enjoyed relative price stability.
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