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Behind the apparent breakdown in relations between Labor and the Reserve Bank is a more bitter feud with the Coalition over reforms. By Jason Koutsoukis.
‘He’s a clown’: Jim Chalmers, Angus Taylor and the RBA
Knackered at the end of two parliamentary sitting weeks, Treasurer Jim Chalmers was heading home to Brisbane on August 22 when Canberra press gallery journalists started peppering his office with variations on the same question: was it true Chalmers had finally reached an agreement with Coalition treasury spokesman Angus Taylor to reform the Reserve Bank of Australia?
After months of stalled negotiations over the proposed reforms, journalists in the gallery were hearing that a deal was as good as done. In particular, it would deal with the government’s signature proposal to split the Reserve Bank’s board into separate groups covering monetary policy and governance – a key recommendation of last year’s independent review.
Chalmers’ staff were scratching their heads at the requests for comment. They couldn’t tell where the story was coming from. Certainly, it wasn’t from them.
Earlier that day, Chalmers had written to Taylor agreeing to a key Coalition demand that would see all existing Reserve Bank of Australia board members shifted onto a new interest-setting board to eliminate the possibility Chalmers would try to stack the board with people sympathetic to the government’s political agenda.
Chalmers’ office played down the suggestion a deal had been agreed to, however, telling journalists they had received no response, either formal or informal, from Taylor’s office.
Friday morning’s papers carried the detail of Chalmers’ letter to Taylor. The Australian Financial Review led its front page with a story headlined “Chalmers offers deal on RBA split”. The Australian splashed with “Treasurer deals in Libs on RBA 2.0” below an all-caps eyebrow header: “CHALMERS AGREES TO COALITION PROPOSALS”.
The stories in both papers carried the same word-for-word quote from Taylor: “As you would expect, we will take our time and work through the detail. As always, we will approach these negotiations in good faith and in confidence.”
Whether or not Chalmers was miffed that the Coalition had leaked the detail of the previous day’s letter, he didn’t betray it when he fronted a Friday morning press conference in Brisbane.
When it came to the proposed changes to the Reserve Bank, Chalmers told journalists the government’s reforms were about modernising and strengthening the bank for the future and making sure it had the structures, decision‑making abilities, people and culture needed to continue making important economic decisions.
“The governor of the Reserve Bank supports these changes,” he said. “The government has proposed these changes in good faith after an independent review, and we need the Coalition to come on board as well.”
Detailing three face‑to‑face meetings he had with Taylor since the independent review of the RBA presented its final report in March last year, as well as three in-person briefings provided to Taylor by Treasury officials and the exchange of a bunch of letters, Chalmers praised Taylor’s efforts to negotiate in good faith.
“I believe we’ve got our differences – myself and Angus Taylor – but in this instance I think he’s got the right instincts and the right intentions,” Chalmers said.
“We’ve been engaging and negotiating in good faith, and wherever there’s been a lineball call, wherever there’s been a view put to me by the opposition, I’ve tried to accommodate that view. I want these changes to be above and beyond partisan politics. I want them to be bipartisan, and that’s what’s driven me at every stage.”
Whatever Taylor’s actual instincts and intentions were in the days and weeks that followed remained unclear until Tuesday morning, when Chalmers woke to news in the AFR that the Coalition had resolved to block his attempt to create a separate interest rate-setting board at the Reserve Bank.
He told the AFR Chalmers’ proposed “amendments” – a list of changes to the legislation that Taylor himself had demanded and Chalmers had agreed to in full in his August 22 letter – left open “the option for a stitch-up of the Reserve Bank board”.
“Recent public comments, from not only the Treasurer but other senior Labor figures in an attempt to blame the RBA for their own economic failures, are deeply unsettling,” Taylor told the AFR.
“Considering recent events, the Coalition has serious questions about the government’s commitment to the continued independence of the Reserve Bank of Australia. We will not be complicit in Labor’s ‘sack and stack’ strategy, which is why we will be opposing this bill.”
This was all news to Chalmers.
“We didn’t hear a peep from them for more than two weeks after we gave them everything they wanted,” a Labor source close to Chalmers told The Saturday Paper. “Not a thing until we pick up the AFR on Tuesday. And this is what they call good-faith negotiations?”
The Chalmers comments to which Taylor was referring were the Treasurer’s statement on Sunday, September 1, three days before the release of the June quarter National Accounts. Those accounts were expected to show – and were subsequently confirmed to show – the economy growing by a meagre 0.2 per cent in the three months to June 30.
“With all this global uncertainty on top of the impact of rate rises, which are smashing the economy, it would be no surprise at all if the National Accounts on Wednesday show growth is soft and subdued,” Chalmers said. “We anticipated a soft economy at budget time and that’s what most economists now expect to see in these new numbers for the June quarter.”
The Australian led with the story the next day under the headline “RBA rates ‘smashing’ nation”, with the paper reporting that Chalmers had turned on the central bank. The AFR, on the other hand, deemed Chalmers’ line about smashing the economy so unremarkable its story didn’t even include it.
Chalmers’ comments were neither isolated – the Treasurer had made near identical observations in June and July, as well as two days earlier on August 29 in an interview with ABC Radio National’s Patricia Karvelas – nor out of step with the views being expressed by other members of the government.
On August 14, Chalmers’ cabinet colleague and former Labor leader, Government Services Minister Bill Shorten, warned a wrong call on interest rates by the RBA could “drive the economy into a brick wall”, with Shorten forcefully rejecting the RBA’s view that the economy was running “a little bit hot”.
“The RBA is independent but that doesn’t mean that they’re immune from being disagreed with,” Shorten said, noting the central bank had fumbled its inflation and interest rate forecasts after the pandemic. “I do not believe the economy is running hot for most Australians.”
Still, with federal cabinet meeting in Western Australia on an otherwise slow news day, the opposition pounced, insisting Chalmers was at war not only with the RBA but with Michele Bullock, the person Chalmers had hand-picked as the bank’s first female governor in its 64-year history.
When Tuesday rolled around, Chalmers planned a set of appearances on breakfast television to tamp down the story but was forced to reject accusations he was trying to shift blame for economic difficulties onto the RBA.
“Jim, I’m a bit worried about you,” Today show host Karl Stefanovic said. “I’ve been away for a couple of weeks and, since I’ve got back, it looks like you’ve been picking fights with everyone.”
Opposition Leader Peter Dutton weighed in on Thursday morning, expressing his outrage at Chalmers’ tactics. He said they smacked of the two people with the most influence on Chalmers: former Labor treasurers Paul Keating and Wayne Swan.
On her feet in Sydney later that day to deliver a keynote address to the Anika Foundation on the costs of high inflation, Bullock brushed away questions about her relationship with Chalmers, denying the two were at war and saying Chalmers was “doing his job and I’m doing mine”.
That wasn’t enough to assuage Wayne Swan, whose long-simmering frustrations with the RBA’s performance spilled into the open during a regular Friday morning appearance on Today.
Accusing the RBA of “punching itself in the face” and “putting economic dogma over rational economic decision-making”, Swan said high interest rates were “hammering households, hammering mums and dads” and “causing a collapse in spending and driving the economy backwards”.
Swan, who is Labor’s national president, has shared his exasperation at the RBA’s performance widely, both inside the ministerial wing of parliament and outside it.
He is not alone in this thinking, with other senior Labor figures furious at the bank’s 13 interest rate rises since May 2022, just three weeks before the last federal election, and the bank’s repeated failures on economic forecasting, a point highlighted in last year’s review of the RBA.
Responding to a speech given last month by the RBA’s deputy governor, Andrew Hauser, in which he said anyone claiming supreme confidence or certainty over what is an intrinsically uncertain and ambiguous outlook was playing a dangerous game, former Labor minister and leader of the government in the Senate Stephen Conroy made his displeasure known.
“This new bloke Andrew Hauser, he has got his LSE [London School of Economics] degree, he’s been to Oxford, but you know, the report into the Reserve Bank found they were insular, arrogant and overconfident,” Conroy said.
“First-year economics, Andrew. You’ve got the degree, go back and read [a] first-year textbook, because it says interest rates are a blunt instrument. Interest rates are hurting the poorest section of the Australian community.”
While Chalmers insists his relationship with Bullock remains positive, an analysis piece by the ABC’s chief digital political correspondent, Jacob Greber, published last Saturday, kicked off further criticism from the Coalition and allowed it to blow up Chalmers’ proposed reforms to the RBA.
Greber quoted one senior Labor figure describing Bullock as a “nutter” and the RBA board as “barbarians” and “weirdos” in the thrall of a “bizarre groupthink”.
Following the piece, on Monday, Opposition Leader Peter Dutton approved Taylor’s course of action at a meeting of shadow cabinet.
Whether or not Chalmers feels aggrieved with the Reserve Bank, there is no doubting his contempt for Taylor, who in April last year warmly welcomed the release of the RBA review.
“The recommendations of the review will clarify the Reserve Bank’s monetary policy role, strengthen its governance arrangements, improve the transparency of its decision-making, and deepen its economic expertise,” said Taylor, adding it was “essential the implementation of the review be as bipartisan as possible and it is the Coalition’s intention to continue to approach the implementation of this review with a spirit of bipartisanship”.
In March this year, Taylor wrote in an opinion piece that Chalmers had a choice: “Work with us on preserving the stability and independence of our Reserve Bank, or work with the Greens to undermine it.”
“How is this bloke?” a Labor source close to Chalmers told The Saturday Paper. “Work with the Libs on preserving stability or work with the Greens to undermine it? Yet he’s the one who backed out after Jim acceded to every single one of his demands. Every single one of them!
“And then he turns around and says, ‘If you want to get this through, go and talk to the Greens.’ That’s called putting the national interest last, all for the chance to gain the advantage during a parliamentary sitting week. He’s a clown.”
This article was first published in the print edition of The Saturday Paper on September 14, 2024 as "‘He’s a clown’: Jim Chalmers, Angus Taylor and the RBA".
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