Could it happen here? The Coalition claims it’s concerned about Labor stacking the proposed new RBA monetary policy board, but Michael Pascoe doesn’t believe them.
The LNP is pretending to be worried about Labor stacking the proposed new RBA board. (Nah, Dutton just wants to force Labor to deal with the Greens so he can say, “Look! Labor does deals with the Greens!”)
Having watched the LNP establish itself as a jobs-for-the-boys-and-girls stacker on an industrial scale at the Administrative Appeals Tribunal (AAT) and elsewhere, it is frankly hilarious to see Angus Taylor try to keep a straight face when suggesting Labor would be as bad as his own party.
And now, smack into the middle of what passes for debate, falls a prime example of a central bank appointment ‘stackee’.
Trump’s Federal Reserve appointee
If you’re prepared to stack the Supreme Court with useful idiots and worse, it’s no surprise you’ll try to do the same with your central bank board. Here’s Exhibit A – Trump-appointed Federal Reserve governor Michelle Bowman.
Understandably overlooked in the coverage of the Fed cutting US interest rates by 50 points overnight was the nature of the single vote on the board against the move – Michelle Bowman’s.
University of California economic historian Brad DeLong noticed. He has pointed out in some detail that Ms Bowman became the first governor to vote against a Federal Open Market Committee decision since 2005.
And what superior experience and intellect did Ms Bowman bring to her decision? For two decades, from the age of 24, she was on a Republican meal ticket of one sort before a fling as a London-based government and public affairs consultant and getting into banking in 2010 as vice-president of Farmers & Drovers Bank in Council Grove, Kansas.
It somewhat surprises me that Farmers & Drovers ran to having a vice-president, given that Professor DeLong reports it only has 25 employees and assets of US$185 million.
There might still be a credit union in Australia that small, but I doubt it. By way of comparison, the winner of last year’s “best small credit union” award had assets of $1.65 billion.
Never mind, her Farmers & Drovers experience was enough to have Ms Bowman appointed State Bank Commissioner of Kansas in 2017 – yes, Kansas is a Republican state – and Trump appointed her as a Fed Governor the next year.
Even by the Liberal Party’s AAT standards, that looks like a bit of a stretch.
The point of a ‘stackee’
But maybe it wasn’t Ms Bowman’s banking and economic experience that led her to vote against the other 11 members – maybe it was Donald Trump having publicly warned the Fed not to cut interest rates before the election and promising they would be cut after he was elected.
Well, in Trump World, what’s the point of appointing someone if they don’t do what you want? Professor DeLong’s examination of Ms Bowman’s voting record found she was on the dovish end of the Fed when Trump was President and hawkish when Biden took over. No doubt purely coincidental.
Trump’s plans to stack everything that can be stacked in the US – and there’s a lot – should serve as a warning to others. So what chance either party destroying the idea of Reserve Bank independence by stacking the board?
RBA policy board
Under the existing single-board system, any board member’s political bias is muted by the much greater influence of the bank’s ‘econocrats’ on decisions.
Under the dual-boards system proposed by Jim Chalmers’ dubious review, the monetary policy board is supposed to have sufficient monetary and labour force expertise and credibility to challenge the bank staff.
There is no shortage of self-proclaimed monetary experts jostling to be noticed, but of those wanting the part-time job of being on the new board, there would be very few, if any, with the cred to roll the RBA.
Overwhelmingly, though, any government would be stupid to try to stack the board with second-rate choices based on perceived political leaning. However inconvenient it might be at times, in the long run, the government is better off seeking the best central bank it can get.
There have been dud appointments to the RBA board, but they haven’t mattered beyond taking up valuable space and time.
The new board – if it gets up, if Chalmers does a deal with the Greens to do the sensible thing of retaining the power to overrule the RBA – will matter a bit more. For a start, it will take up a lot more space and time.
As stated, a government would be stupid to do a Trump – not that we don’t have governments that are stupid from time to time.
The Reserve Bank of Australia really does want Aussies poorer
Michael Pascoe is an independent journalist and commentator with five decades of experience here and abroad in print, broadcast and online journalism. His book, The Summertime of Our Dreams, is published by Ultimo Press.