Michael Pascoe: Chalmers’ cultural cringe in RBA appointment

Photo: TND/AAP

So Jim Chalmers has appointed a fourth-tier executive from a second-rate foreign central bank to be 2IC of the Reserve Bank of Australia, perhaps a heartbeat or early retirement from the governorship.

It smacks more than a little of cultural cringe. 

That’s not how everyone else is reporting the Treasurer’s appointment of a Bank of England official as the new RBA deputy governor, but “everyone else” has pretty much been drinking the Treasury Kool-Aid on the RBA since the election. 

While Treasury’s multiple and much bigger failures go unreviewed, the RBA has been conveniently blamed for all the economy’s ills and given no credit for what goes right – a situation that suits the Treasury and Treasurer just fine. 

Second rate

Well, if the central bank bears primary responsibility for a country’s economy, the Bank of England is second rate compared with the RBA. 

The UK’s unemployment rate and 12-month inflation rate – the key responsibilities of central banks – are worse than Australia’s. Australian GDP per head in real US dollar terms is 29 per cent higher than the UK’s. Australia’s real GDP has grown by 8 per cent since December 2019 while Britain’s has crawled just 1.8 per cent higher. 

The Bank of England, the Old Lady of Threadneedle Street, might sound grand with its butlers in pink frock coats and top hats, but its track record is not something Australia’s central bankers need to doff their caps before. 

Yet it’s to Mother England Jim Chalmers has turned for help, there apparently being no Australian good enough.

In fairness to the new appointee, Andrew Hauser, the BoE’s lacklustre performance is not his fault – he hasn’t been in a significant enough position to be held responsible for it. 

He has not been one of the four BoE deputy governors and is not one of the executive directors on any of the bank’s three key policy committees. 

He is one of the bank’s 21 executive directors.

I don’t know Hauser but it seems a stretch to label him a “boffin”, as the Australian Financial Review did – these days, you probably need a PhD to qualify for boffindom – or a “star” as The Australian headline writer did, as it looks like he has not been in the running to rise to deputy governor in London and thus is trying his hand in Australia. 

It sounds like Hauser has done some important work at his bank – many people do – and is reportedly a very smart man and obviously he managed to impress Jim Chalmers. He may well be the very model of a modern central banker that the RBA has been crying out for – but there’s no reason to take the Treasurer’s word for it given the dubious nature of RBA review Chalmers instigated and embraced with such alacrity. 

Monetary policy the main game

Instead, it is reasonable to wonder why the Treasurer would want both a governor and deputy governor who don’t come from the monetary policy side of central banking, as monetary policy is where the main game is played. 

And, if “fresh eyes” for the rejuvenation of the bank’s culture is what it’s all about, it’s reasonable to wonder why the Treasurer has appointed another life-long central banker as deputy to a life-long central banker. Neither adventurous or inspiring.

It’s not obvious to me why the BoE’s bigger, fatter bureaucracy would be considered a superior training ground for rejuvenating the RBA or what sort of grasp of the Australian economy and political thicket a 31-year BoE economist might arrive with. 

Meanwhile, there has been the red herring of the government preparing to officially drop its power to over-rule the RBA’s interest rate decisions, theoretically bolstering the bank’s independence. 

The government appoints the board and having its Treasury Secretary on the board hardly ensures “independence”. 

Rather than such surreptitious influence, the present system of requiring the government to account for any over-ruling of the RBA looks more honest if we’re sticking with this democracy thing. 

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