Some more musings on Ian Macfarlane and the Reserve Bank, following his
appearance before the House of Representatives Economics Committee last Friday.

Just how independent is the Reserve Bank of Australia? Not very, we’d
suggest. Or is it just fearful of retribution from Howard and Costello
if it does the wrong thing?

Not only did the RBA pause its interest rate hiking cycle some ten
months before the October 2004 election – only to resume it five months
after polling day – but the Governor has chosen sides by not going
public with his concerns about the deceptive material in Liberal Party
advertising during the 2004 election campaign.

You remember the stuff. It claimed, among other things: “Under
Labor, you may need to find an extra $962.34 every month just to keep
your home.” At the bottom of the literature the words “Source: Reserve
Bank of Australia” appeared. Head to the fifth page in this link to jog your memory.

Macfarlane’s unwillingness to go public on this issue during the
election campaign showed how Howard and Costello are stacking the
bureaucracy with people willing to play favourites on all the sensitive
issues. And on interest rate settings, the Reserve Bank is no different.

Think back ten months to the prominence of the interest rate issue
during the election campaign. Recall the ads, the pamphlets and claims
from Costello and Howard that “interest rates will be higher under
Labor than under the Coalition”.

The scandal was not so much that the Liberal Party included the RBA as a source
for their exaggerated claim (or lie, some might say), but that the RBA
failed to go public with its concern when it knew the material was
false.

All of which makes the exchange last Friday between Macfarlane and the new
Labor Member for Prospect, Chris Bowen,
more interesting:

BOWEN: I want to start off by asking you: did you consider making a
public statement about that, distancing yourself and the bank from the
alleged sourcing of the data from the bank? If you did consider making
a statement, why didn’t you?

MACFARLANE: Obviously, we considered various ways of responding… as to
why we did not rush out into the public arena with it, I think the
answer is that it was a actually a relatively small infraction… If we
had gone out publicly it would have been a front page story: “Reserve
Bank attacks government for misrepresentation.” Are we going to do that
because one asterisk is missing?

Macfarlane went on, in one of the most extraordinary understatements in
recent times: “I think the person who put the leaflet out could
probably legitimately say: ‘That was simply an accident: I forgot to
put the asterisk in.’ So we had to make a judgment on the basis of a
sense of proportion. Is it worth having a huge political bunfight in
the middle of an election over the fact that in one electorate the
person who put out a leaflet forgot to put an asterisk in?”

Malcolm Turnbull saw the potential damage and interjected with his
question for the RBA about the reasons why NSW has the lowest GDP in
Australia. Macfarlane avoided a nasty political stoush and a political bun fight was
avoided – but the Liberal Party won an election and a Senate majority
in part because of his deliberate decision to remain quiet. And for such
significant reasons, too, on important information that was pivotal in
the election campaign.

As Bowen mentioned in his remarks: “The bank has made public statements
in the past distancing itself from reporting of the bank’s position on
a number of occasions. The ones that come to mind are when there were
reports about concessional home loans for bank staff… and… when you
[Macfarlane] made a speech which had been misrepresented by members of
the media as an attack on government policy.”

Have a look at this link.