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RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

It’s independent of government, has enormous power over our lives, and hasn’t been reformed in 25 years.

But yesterday, the Reserve Bank was changed forever. And even the Governor, Philip Lowe, conceded parts of the RBA had been out of step with modern expectations.

But will a new board of experts improve the way interest rates are set? Can workers have a seat at the table? And what does it mean for the future of Philip Lowe?

Today, columnist for The Saturday Paper, Paul Bongiorno, on why the government is changing the future of the RBA.

It’s Friday, April 21.

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RUBY:

So, Paul, yesterday the Treasurer Jim Chalmers, announced that his government would undertake the biggest overhaul to the Reserve Bank since the 1990s. And this, of course, comes after a review into the RBA, which has been running for the better part of a year now. So what did this review find and what changes are coming for the Reserve Bank?

PAUL:

Well, the Reserve Bank has been under the microscope, as you say, for almost a year. Jim Chalmers instigated an inquiry a month after coming to the Treasury amid a lot of concern, a lot of criticism, about the bank and the way it had been operating.

Archival tape – Jim Chalmers:

“Now we want to make sure that Australia's monetary policy framework delivers the right decisions and makes the right calls for the Australian economy and for the Australian people. That's what has been motivating this report. The work of the review panel and the thinking of the Albanese Government.”

PAUL:

I've got to say that this was a thoroughgoing review: looked at all aspects of the way in which the bank operates, looked at the way central banks overseas operate, and it was given the riding orders by the Treasurer to come up with the recommendations that would make the Reserve Bank of Australia the best central bank in the world. Quite a big remit.

Archival tape – Jim Chalmers:

“And my goal here throughout is a world class central bank which is more effective, more transparent, and more independent.”

PAUL:

Well, the Treasurer announced yesterday that it had come back with 51 recommendations. And the Government, he says, will accept all of these recommendations in principle.

Archival tape – Jim Chalmers:

“It is my hope that we can work towards having an agreed statement in place by the end of the year, and that the recommendations of the review can be in place, ready to implement, and ready to go by the middle of 2024.”

PAUL:

He said there will be legislation needed to implement these reforms, but he's been very careful along the way to involve the opposition almost at every step.

Archival tape – Jim Chalmers:

“I did want to acknowledge Angus Taylor. Angus and I have our differences across a range of policy areas, but he has engaged, I believe, in this process in a considered way and in a cooperative way.”

PAUL:

Shadow treasurer Angus Taylor has been in on this review, and the Liberals played a big part in insisting that the inflation target of 2% or 3% be maintained. But the biggest reform announced by the Treasurer is that the bank's function will be split into two.

Archival tape – Jim Chalmers:

“And we also will seek to establish separate monetary policy and governance boards to strengthen expertise, decision making, and bring us more into line with world's best practice.”

PAUL:

There will be a governance board and another one to set policy. Now this one to set policy, that is monetary policy or where interest rates go, it will be made up of experts. One of the big criticisms of the Reserve Bank in recent years, in fact, going back two or three governments, is that Labor and Liberal governments tend to use the board for a little bit of a political window dressing. The Coalition governments don't like having union leaders on it and so they don't appoint them. And coalition governments like to have small business people in there, so they appoint them. And the problem with all of that, these people might have their own particular expertise, but they don't have the technical expertise in understanding macroeconomics, and understanding the interrelationships and driving of the economy, both domestically and internationally.

Archival tape – Jim Chalmers:

“I think that there is a role for somebody who understands, is an expert in the labour market, and particularly in wages; the relationship between all of the other issues that the Reserve Bank board grapples with and considers and contemplates.”

PAUL:

And of course, to be noted, the way in which these appointments had been made has tended to mean that the board, instead of interacting and bringing its own particular economic expertise to decisions, virtually became a rubber stamp of the governor and his experts. There was no second guessing which could have resulted in, you know, a better way of managing interest rates and managing the economy.

Archival tape – Jim Chalmers:

“This is about learning from the past to strengthen the Reserve Bank for the future. This is about bolstering the independence of the Reserve Bank, not diminishing its independence.”

RUBY:

And Paul, there's been a lot of criticism of the RBA Governor, Philip Lowe, in recent months, and there's no doubt he's overseen the bank at a particularly controversial time. Is it hard to read this announcement as anything but a critique of his tenure?

PAUL:

Well, the Treasurer was keen to emphasise that this review wasn't only looking at the way in which Governor Lowe and his board have been operating. In fact it had a wider purview going back six years, not just the past six months. But look, there's no doubt that with admissions coming out of the board itself, that they got it wrong by sitting on interest rates for far too long, letting inflation build up a head of steam, then when they reacted, ten interest rate rises in a row, that hit too hard. And, of course, when the governor himself made a prognosis that there would be no interest rate rises till 2024, which he had to, of course, renege on. And that hit a lot of investors, a lot of borrowers very hard. All of that gave a greater edge to the review and of course, raises questions now, what for Philip Lowe? Well, his term ends in September. Usually they're reappointed. The Treasurer has been very coy about whether he's going to reappoint Philip Lowe, just saying that, well, he'll make that decision in due time. Lowe himself has indicated that he has no intention of quitting early, but all the indications are that come September we'll have a new Reserve Bank governor and a whole new look for the Reserve Bank.

RUBY:

Okay. And Paul, this is obviously a big moment for the Treasurer, Jim Chalmers, but he is at the same time facing his own problems, isn't it? Because the budget is right around the corner and it seems like there will be some very difficult decisions that need to be made. The reports that Chalmers will actually ignore the results of another review that the Government launched, that is into raising unemployment benefits. So what's going on there?

PAUL:

Well Ruby, the message from both the Treasurer and the Prime Minister is that this will be a budget of restraint, and they keep reminding us of that trillion dollars worth of debt that they've inherited from the previous government. Trillion dollars, it's a rounding figure, a pretty big rounding figure. So we're going to see savings. That means outlays will be cut somewhere and there will be losers. But there is pressure coming — especially from the areas of social service and social security — for the government to get real in the relief that it is giving the more vulnerable people in our society, for a number of years now, everybody, including Labor in opposition, have criticised how low the Newstart Payment is, the unemployment benefits are, and David Pocock, the independent Senator in the ACT, well, he got the Government to set up what's called a social inclusion committee, which reviews how these payments are interacting with their recipients, and whether they're in any way adequate. Well, you probably didn't need a review to say that they're far from adequate and they’re too meagre. And so the recommendation to the government that we heard about earlier in the week was that the Newstart payments should be boosted to 90% of the aged pension. Now over three years that had cost $24 billion, and the Treasurer and the Prime Minister were pretty keen to assure us that that's not going to happen. However, we can expect to see some relief. Relief, however, just not automatically tied to the pension, or the inflation rate, or the cost of living. It would be very hard to see how the Government and the Treasurer could ignore the recommendations of this committee completely.

And I'm told now that Treasurer Chalmers will take the Government's agenda beyond the election. So it's going to be fascinating to see what exactly that means. But the Treasurer has been somewhat frustrated that he hasn't been getting the attention in the media that treasurers normally get in the run up to a budget. The media has been preoccupied with the Voice referendum, the fumbles from the Liberal Party, and all the ructions around the “Yes” and “No” cases.

RUBY:

We'll be back in a moment.

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RUBY:

Paul, while Jim Chalmers has been working on these major changes to the Reserve Bank, the Liberal Party face yet another resignation from the frontbench, Karen Andrews. So is this a sign that things are getting worse for the Liberal Party?

PAUL:

Well, it's true that ever since Peter Dutton decided to double down hard in opposing the Voice referendum, and being the biggest naysayer for the ‘No’ campaign, the Liberal Party, not only the parliamentary party, but the broader Liberal Party has been at sixes and sevens. We saw last week the resignation of Julian Leeser, the shadow attorney general, because he wants to campaign for the “Yes” vote. Well, there was a bit of a surprise when Peter Dutton announced his reshuffle to replace Leeser. He appointed the Northern Territory Aboriginal Senator Jacinta Price as Shadow Indigenous Affairs Minister, and one of the biggest critics of the Voice referendum, a rapid promotion for her. She's only been in the Parliament for less than a year and she's already in shadow cabinet.

Archival tape – Karen Andrews:

“Both of the major parties need to focus on proactive outcomes rather than how much they can beat each other up for the silly little reasons.”

PAUL:

But as it were, from right field, or maybe it was left field, Karen Andrews, the Shadow Home Affairs minister, resigned from shadow cabinet. She had been the Home Affairs Minister in the Morrison Government.

Archival tape – Karen Andrews:

“Look, there's no one single reason. There were probably a number of contributing factors to that. But ultimately my decision was to call time on my political career. I mean, this is not the only career that I've had. I've not been a career politician.”

PAUL:

Now, she claims that the Voice had nothing to do with it, although since quitting, she's given a number of interviews and one particularly revealing one on RN Breakfast the other day, where she criticised Peter Dutton for focusing so much on the Voice.

Archival tape – Patricia Karvelas:

“Tony Barry, who now is with Red Bridge Group. Of course, former Liberal Party staffer/strategist says if you focus on fringe issues, you get fringe results. Do you agree with him?”

Archival tape – Karen Andrews:

“Yes, absolutely. At the end of the day, people are very concerned about what affects their daily life…”

PAUL:

And I have to tell you that Andrew's misgivings are reinforced by three opinion polls this week, which strongly suggest that Peter Dutton has made a huge political mistake in going so hard on the ‘No’ campaign. The Essential poll in The Guardian and the Resolve poll in the Sydney Morning Herald and The Age show Labor has increased its two party preferred lead over the Opposition and is now 14%. But more to the point in regards to the ‘No’ campaign, resolve found 55% support in Queensland for the ‘Yes’ proposition. All the polls showed a collapse in approval for Dutton. Now I'm told these polls resonate with Labor's tracking. One Labor strategist told me that the results of their tracking polls are catastrophic for Peter Dutton and the Coalition.

RUBY:

So within the Liberal Party, obviously Andrew's resignation speaks to some disquiet about the strategy that Dutton has taken here. But is this likely to be the end of it, Paula, or are these complaints about how Dutton has handled this only going to grow from Coalition backbenchers, particularly also in the light of these polls?

PAUL:

Well, that's a real concern among some Liberals that Peter Dutton has gone in so hard on his determination to defeat the referendum that if he wants to build any momentum for ‘No’, he's going to talk about little else in the next six months. And the broader concern on the Liberal backbenches that Dutton's strategy is so out of sync with metropolitan voters that this ‘No’ campaign and putting Senator Jacinta Price up to lead it so stridently as she does, does absolutely nothing to win back metropolitan seats. The Liberals, if they want to get back into government, are going to have to win back the seats they lost in Sydney, Melbourne, and Brisbane to start with, as well as over in Perth. And the polls are showing that voters in metropolitan Australia favour the “yes” vote.

Archival tape – Anthony Albanese:

“For over 120 years with the best of intentions, governments have done things ‘for’ Aboriginal and Torres Strait Islander people, ‘to’ Aboriginal and Torres Strait Islander people, not ‘with’ Aboriginal and Torres Strait Islander people…”

PAUL:

When you put all that up against what we saw, in what I think is the image of the week, of Labor Prime Minister Albanese in Hobart, flanked by Liberal Premier Jeremy Rockliff. And over his shoulder Bridget Archer, the Liberal backbencher from Tasmania, all there to wave off another former Liberal MP, Pat Farmer, as he began his 14,000 kilometre run around Australia to support the Voice.

Archival tape – Sky News Reporter:

“He will run around Tasmania, then fly to Perth, run up the West Coast to Broome, then to Darwin, across to Townsville, down the East Coast to Brisbane, then Sydney, Canberra, and Adelaide. Then will meet Prime Minister Anthony Albanese and thousands of fans at the finish line at Uluru.”

PAUL:

And Ruby, Farmer told the crowd that in his view the Voice was a no brainer.

Archival tape – Pat Farmer:

“It seems to me for every person under the age of 30, that this is an absolute no-brainer, and I can't understand why we're even having a referendum on the issue, that it should just naturally be in place already.”

PAUL:

Well, those views certainly do nothing to help Peter Dutton's campaign.

RUBY:

And just finally, Paul, with the budget only a few weeks away now, how do you think that Anthony Albanese and Jim Chalmers are likely to try and capitalise on on riding high in the polls? Do you think that they might actually take the chance now to do a few things that could be considered unpopular or politically risky?

PAUL:

Well, many would hope so. The Greens say that the Labor Government is morphing into a centre-right government and it's too timid. It's clear that Albanese has the view that the way to keep the electorate onside, and the way to be able to do things is to do them softly, and gently, and not to spook anybody with any big surprises. And you know, when you think about it, all of that probably means that we haven't got on our hands a great reformer. Although the other argument is, the way to get reform is to keep people with you, to let them know where you're going, and to show them that it's not too scary after all. Well, that's the theory. And so far it's working for Albanese, no doubt about it. But Adam Bandt and the Greens says, “look, if you want reform, you're not going to get it from a centre-right government like the Labor Party is becoming. You're going to have to get it from someone like the Greens who have now become the party of social democracy.” I think that's beguiling for people more on the left of politics, but I don't think it would appeal to the broader voting constituency that has deserted the Liberals for Labor.

RUBY:

Paul, thank you so much for your time.

PAUL:

Thank you Ruby. Bye.

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RUBY:

Also in the news today…

The RBA Governor Philip Lowe responded to the changes to the bank by admitting that the oversight of his own role as head of the bank wasn’t up to modern standards under the existing structure.

Archival tape – Philip Lowe:

“I think it's true to say that from a number of perspectives, the current oversight arrangements have me as the governor for managing the bank falls short of contemporary standards.”

He went on to accept the review’s recommendations and committed to working with the government to implement them.

And…

Former Prime Minister Kevin Rudd has begun his tenure as Australia’s ambassador to the United States by visiting President Joe Biden.

In comments after the meeting, Rudd promised to use the position to further joint efforts to tackle climate change and explore economic opportunities on behalf of the Albanese government.

7am is a daily show from The Monthly and The Saturday Paper.

It’s produced by Kara Jensen-Mackinnon, Zoltan Fecso, Cheyne Anderson and James Milsom.

Our technical producer is Atticus Bastow. Our editor is Scott Mitchell.

Sarah McVeigh is our head of audio. Erik Jensen is our editor-in-chief.

Mixing by Laura Hancock, Andy Elston and Atticus Bastow.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

I’m Ruby Jones, see you next week.

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