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RBA: More Than a Monthly Forum About Interest Rate Settings

By Denis Bright

The electorate rightly expects the Labor Party to shake up the ideological corridors of power after almost a decade of government by the federal LNP since Tony Abbott’s initial victory on 7 September 2013 with that landslide net gain of eighteen seats.

Labor insiders know that Labor has been able to secure really a long-term government only during the Hawke-Keating years (1983-96) with the Curtin-Chifley era (1941-49). On other occasions, Labor years have been single-term or two term wonders that ended in a shuffle back to the LNP or its historical predecessors after some major calamity arising from external factors or internal leadership or constitutional crises.

This time Labor is clearly striving for a repeat run of a long-term government. The mainstream media’s coverage of the Labor Government’s decision to reform the RBA has been months in the making and shows the responsible caution of a government that is committed to long-term changes (Treasurer’s Media Statement 20 July 2022):

The Treasurer, the Hon Dr Jim Chalmers, announced the Review of the Reserve Bank on 20 July 2022.

The Review was designed to ensure that Australia’s monetary policy arrangements and the operations of the Reserve Bank continued to support strong macroeconomic outcomes for Australia in a complex and continuously evolving landscape.

The Reserve Bank assisted the Review Panel in a number of ways, with individual and group discussions, and the provision of information in response to questions. Staff were also invited to make public and private submissions, respond to a confidential survey and participate in focus groups.

As Treasurer, Dr Jim Chalmers has helped to open up discussions about the complexity of RBA structures. Awareness of these structures is essential for effective media coverage of the operations of a central bank.

Our economy should be a major independent global player befitting a potentially rising star on the international scene. Australia will soon eclipse Italy in the top ten of world economies. Even today, the Australian economy generates half the output of France or Britain.

This Australian economy needs to diversify and develop a more independent financial sector with closer ties to Asian and Pacific countries. What a contrast to the All the Way With the USA economic diplomacy of the successors of Robert Menzies with the support of the Murdoch Press and Sky News Networks.


Understanding the Emergent Structures of the RBA: Important for Media Analysis of Our Place in Global Geopolitics

RBA operational structure


Unfortunately, press releases from the RBA retain an emphasis on monetary policies which are only a component to the RBA’s potential influence on Australian economic diplomacy through bank structures with the support of DFAT and the PM’s own Office of National Assessments (ONA).

There are many positives in the RBA’s Fit for the Future Recommendations which were presented to the government last month and released to the media on 20 April 2023 (Preamble to the RBA Review):

The Australian public can be confident that Australia’s monetary policy framework is broadly fit for purpose and that the RBA is a high quality, effective institution. We have identified 4 ways the governance, monetary policy framework, culture and systems of the RBA should be reinforced.

  1. The monetary policy framework is fundamentally sound but should be more clearly defined and regularly assessed for updates.
  2. Monetary policy decision making should be strengthened, drawing on more expertise and with processes that promote deeper contestability of ideas.
  3. The RBA should become more open and dynamic, through new internal structures and approaches.
  4. The RBA’s corporate governance should be strengthened, with contemporary governance structures that better manage risk and drive change.

Commitment to price stability and full employment receives 256 mentions in the RBA Review. Painful upward adjustments in interest rates may become less significant in a more diversified Australian economy with its links to Asian and Pacific countries. This is always the goal of progressive Labor Treasurers.

In the post-1996 era which has largely been under the direction of the federal LNP, the RBA Review noted that monetary policies have always received a higher priority over the broader goals of the Reserve Bank Act 1959:

The Reserve Bank Act 1959 (s 10(2)) directs the Reserve Bank Board to conduct monetary policy in a way that, in its opinion, ‘will best contribute to: stability of the currency of Australia; the maintenance of full employment in Australia; and the economic prosperity and welfare of the people of Australia. ’Since 1996, the Reserve Bank Board’s approach to meeting these 3 objectives has been agreed upon with the Treasurer in the Statement on the Conduct of Monetary Policy. The approach is ‘to focus on price (currency) stability… while taking account of the implications of monetary policy for activity and levels of employment in the short term.’

The post-1996 strategies have still produced good results for the Australian economy in comparison with other developed economies.

Striving for excellence is a hallmark of the current Treasurer. In the media savvy world of contemporary politics, political campaigning is embedded in every effective political news interview. The need for soggy campaigning literature in letterboxes is lessened by good professional news reporting which can undermine the appeal of far-right populism in those many disadvantaged urban and regional electorates which still cling to the federal LNP particularly in Queensland and Regional NSW.

My only suggestion from the Treasurer’s good news media forays is to open up the varied structures of the RBA to coverage of the bank’s roles in contemporary economic diplomacies in this America First Era. At least, volatility on global markets has moderated in the transition from the COVID-19 era as measured by the VIX Chart where negatives are a good sign of market stability. However, market volatility changes by the hour and a correction could come any day. Expect more forays of market volatility in a failing US economy with its enormous social divides.

However, American First strategies carry global weight because of the sheer size of the financial outreach of the US economy. Going All the Way with the USA is a dangerous strategy for Australia and is probably our greatest security risk.

Should the Republicans win control of the White House in 2024, readers can expect a return of a Reaganite style of economic diplomacy based on high interest rate strategies to vacuum global capital flows into US markets. In this Reagan era, the Aussie dollar dipped below 50 cents during the mid-1980s (Trading Economics):


Trendlines in the Value of the Australian Dollar to the Greenback (AUSUSD) and Comparisons with the Exchange Rate of the Chinese Yuan (USDCNY)


Important Postscript form Trading Economics 21 April 2023: The Australian dollar fluctuated around $0.671 and is set to finish the week little changed as traders weighed a hawkish view on domestic interest rates against firm expectations that the US Federal Reserve will tighten policy further next month. Minutes of the Reserve Bank of Australia’s April policy meeting showed that members were determined to do what is necessary to bring inflation back down within target. The minutes revealed that the central bank only paused its interest rate hikes this month to allow time to gather more information. Analysts suggested that the RBA could raise rates again, potentially by more than one 25 basis point increase, if inflationary pressures persist. Meanwhile, a slew of Fed officials supported the need for another rate hike to tame inflation, with St. Louis Fed President James Bullard favouring a higher terminal rate of between 5.50% to 5.75%.

In Dr. Jim Chalmers there is hope for a different future but the electorate should demand more responsible risk taking to protect our economy from forces which can generate out of control in the hands of US populists. Let’s have some more leaks on the Treasurer’s recent interactions with political elites in the USA.

As always, my comments are distributed to promote discussion. My household does not have the resources of the RBA, DFAT or ONA so my interpretations are always open to challenge from more informed and perhaps more logical sources. That’s what critical journalists should encourage unless the writing task is a straight ego trip.

Denis Bright is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback by using the Reply button on The AIMN site is always most appreciated. It can liven up discussion. I appreciate your little intrusions with comments and from other insiders at The AIMN. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Reply button.

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  1. Tony LeComte Moritz

    A very cold and financially clinical and aloof article, with a very distinct lack of focus on the social (eg not a single mention of Chalmers’ rejected increase to Jobseeker, which was recommended by the Select Committee). Nah, it’s all about the RBA and high level fiscal policy et al, there’s nothing here for we the little people. And nor will there be in Chalmers’ upcoming budget.

  2. andyfiftysix

    What i want to know is how the value of assets was allowed to grow faster than wages. If inflation is caused by corporate profit growth and not wages growth, why are home mortgage owners then the scape goats? The system is screwed up and the RBA has had a hand in it for the last 20 odd years. It tells me its tool box is bare and it has no intellectual ability to invent them.
    I see the whole western world has also had an asset price explosion. What have we done with our wealth? plowed it into assets?
    I suggest if the powers that be want wages to not influence inflation, a good start would be deflating housing prices. That 1/2mill extra you wouldnt have to borrow is equivalent to a massive wage spike.
    Lets not let facts replace ideology, how silly would that be.

  3. Phil Pryor

    It seems that the vaguely new upper classes are rich in assets,and a “conspiracy” or coalition of interests, or a like grouping of those in positions of executive action, make sure that the order givers, pace setters, controllers, managers and executive class generally do very well, while those tradies, wage earners, genuine dirt diggers, etc, get a bit if they are lucky with overall market conditions. So the ordinary older punters have done well enugh by world standards, but the money managing, hoarding, planting, dealing, rigged betting types do well above the markets, the odds, the decencies, for society’s real health. We should be fairer, better, more honest.

  4. Leila

    Wishing the Treasurer well on our behalf. He seems a genuine and committed treasurer Thanks Denis for the details.

  5. Marcia

    An important article about our security and living standards into the decades ahead .

  6. Burleigh Waters

    Great article Denis! ! !

    A genuine article about our future. Economic diplomacy is a great resource and is covered in my MBA course.

  7. James Robo

    Australians want economic solutions over divisive rhetoric in politics. Economic diplomacy can reach across the political aisle. It could be both a Labor and Opposition policy tool. The RBA can diversify its repertoire of copy options beyond regular interest rate hikes in the long term but this will require an upgrading of the RBA’s existing international department.

  8. Tessa_M

    Leaders have been playing with economic diplomacy since ancient can be a progressive concept in the hands of Labor leaders like Jim Chalmers. I wonder if he raised the issue in Washington with those political elites from the IMF and the Biden Administration on behalf of those people back in Logan City? As the leader of the 12th largest global economy, Australia should be in that policy game to foster closer relations with Asia and the Pacific. China too has been holding its ground to make the yuan a major international currency with Belt and Road Projects.

  9. Chloe

    Thanks for a well written article about the RBA and interest rates.

  10. Clakka

    I’m with andyfiftysix and Phil Pryor.

    I’ve been watching for decades the absurd erosion of the ability to earn and save in the middle and lower classes. Following the important structural reforms and opening of our economy via the Hawke/Keating years, there was a need for further follow-on reform. But for Hewson’s GST, instead we got Howard and his utterly destructive anti-social and divisive manoeuvres that drove money into the hands of the olde worlde, pumping feckless retirees, a crazed ramping of ill-considered privatisations unleashing a manic on-rush by the States, and of course the delirious outsourcing of government services to a cabal of international and local profiteers. ‘Economic rationalism’ my arse!

    I may as well add to this view of stupidity, the cringing ineptitude of the MRRT and PRRT and imbalances of the various associated royalty systems. As I watched this onset of ‘economic rationalism’, our natural bounties and economy being sold up the river, I also witnessed the incessant background noise of demands for concomitant structural reform of taxation – reform that should have been devised and come hand-in-glove with the manoeuvres of ‘economic rationalism’. Instead there were crickets, and an industrialised business laziness, a failure to invent and compete, instead living off the government enfranchised (banker’s delight) debt driven unfettered, untaxed access to our natural bounty and the fat squeezed by oppression of the wage and salary earners.

    It set the scene for a feeding frenzy by the profiteers of the Anglo-American imperium. And whilst this was underway, the Rudd / Gillard years of Labor, beguiled by the coffers of temporary (once in a lifetime) fat, did much for social policy, but sat complacently on the time-bomb of dysfunctional industrial policy, and continued, just like others to do zilch to address structural reform of the taxation system.

    And then, wham! The profiteers and gangsters across the imperium, in concert with the gormless bankers blew the world’s economies to smithereens, pushing money flows into a paranoid stagnation, and causing craven governments to rescue the system using wage and salary earner’s hard-earned. The poor, beguiled by the profiteers and gangsters, would have no manumission.

    And yet, what did I then see? No structural reform, no concern for an outlook of stranded assets, just a shift into the hometown elite’s sacred cow; real property. Come one, come all, not only the Anglo-American imperium, but also the Chinese, and any others, profiteers and gangsters dodging home country harshness and gaols or death squads. Bring your cash here, we’ll smooth the way, show you how to dodge the FIRB. Buy our property and land for inflated prices – Oh goody, the rise and rise of the Squattocracy – theft by name theft by nature! And who, I ask, gets swept aside into penury or a starvation diet and the unremitting debt trap? The wage and salary earners – and granny has no more money.

    What ever can the RBA do whilst any government and the grossly over-leveraged economy is under the thrall and control of currency manipulators, the inevitably corrupted bankers, the profiteers and gangsters. Whatever happened to parliamentary supremacy? Apparently they abdicated for 30 or so years whilst they fled into over-leveraged investment portfolios.

    No use observing anything of the last 9 years of the LNP. That was just a complete La La Land of embezzlement and a gospel of corruption.

    It’s down to our government, fiscal action and structural reform. No better time to start than now or forever be known as cringing opportunistic toadies. And all the aforementioned sheet-anchors on our economy and wellbeing need to be addressed or we’ll all be stranded. Now, whilst also addressing climate change and transnational security. What better time?

  11. rubio@central coast

    Hey Tony Moritz. Mainstream Labor needs to be re-radicalized to bring leftists back from the Greens and the Socialist Alliance Parties. Economic diplomacy with a progressive bent could be a popular strategy for revitalising Labor in a stronger economy with a capacity to pay be job seeker allowances and bulk-billing of medicare as well as less severe means tests on pensions. I have no faith in the Green ideal of unatable government from the cross-bench but 10 percent ofthe electorate are attracted to this concept. Only a long-serviving Labor government with a committed social demoicratic agenda can made the changes that you correctly advocate. If the US is using economic diplomacy to assist its military and civilian corporations, Austrlaia should follow these guideline but with our own more peaceful agenda through links to Asia and the Pacific.

  12. Terence Mills


    The GST is an interesting example of how John Howard chose to lie his way into office.

    Before he was elected he said : “Suggestions I have left open the possibility of a GST are completely wrong. A GST or anything resembling it is no longer Coalition policy. Nor will it be policy at any time in the future. It is completely off the political agenda in Australia.” Later that day, confronted by a clamouring press pack, he compounded the lie. Asked if he’d “left the door open for a GST”, Howard said:

    “No. There’s no way a GST will ever be part of our policy.”

    Q: “Never ever?” Howard: “Never ever. It’s dead. It was killed by voters at the last election.”

    He got elected but 27 months later, in August 1997, less than 18 months after becoming Prime Minister, Howard told the truth by telling more lies. He announced a “great adventure” in tax reform he wanted to “share with the Australian people”.

    Six months later, we learned that it was Howard’s coalition policy to introduce a GST. Howard then lied again by saying in parliament in April 1998: “I went to the 1996 election saying there would not be a GST in our first term. I go to the coming election saying we are going to reform the tax system … The Australian public are entitled to be told before an election what a government will do after the election. They do not deserve to be misled. They do not deserve to be deceived.”

    He then proceeded to deceive the Australian people !

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