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DANIEL:

From Schwartz Media, I’m Daniel James. This is 7am.

The Reserve Bank should lower interest rates and if they don’t, the government should make them. That’s according to the Greens.

Their spokesperson for economic justice Nick McKim, has said he won’t support the government's reforms to the RBA unless the treasurer intervenes in the bank’s decision making processes and tells them to lower interest rates.

It’s a big demand, something that has never happened before and is unlikely to now, with Labor saying the Greens are “out of control”.

And there is also unrest within the Greens about the position, with some concerned the demands go too far at a time when the party is looking to make itself a viable alternative to the two major parties at the next election.

Today, national correspondent for The Saturday Paper Mike Seccombe, on just how independent the Reserve Bank is and what the Greens are playing at.

It’s Friday, September 27.

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DANIEL:

Mike, thank you so much for joining us.

MIKE:

It's always a pleasure.

DANIEL:

What was your reaction when you heard the Greens were demanding the Government force the RBA to lower interest rates?

MIKE:

Well, frankly, I wondered what they were playing at and I would suggest so did most other commentators out there. You know, clearly the Greens have been on a bit of a roll of late. You know, they've done very well raising the issue of the high cost of housing which now has the government looking at maybe changing the tax breaks around negative gearing, so a win. But equally clearly, this particular one is not something that this government or any other government, I would suggest, would ever do. You know, they are not going to take the interest rate setting power off the Reserve Bank. I was a bit flummoxed by it and so I called Nick McKim, who's the relevant Greens spokesman on Treasury matters, and asked him to tell me why he thinks the Government should do this.

Audio Excerpt - Mike Seccombe:

“I guess the question is, are we really in extraordinary circumstances at the moment? I mean, you know, we’re not…”

MIKE:

So I called him just a few hours before the RBA's Tuesday rates announcement, and he gave me a prediction. He said that the central bank would not lower rates and that the government would respond with, quote, the usual ritual of ashen faced hand-wringing.

Audio Excerpt - Nick McKim:

“Hand-wringing every time interest rates go up. Where they go out and pretend there is nothing they can do about it so they can empathise with people who are getting smashed. Right, it's theatre…”

MIKE:

He also said the Reserve Bank is not independent and never has been.

Audio Excerpt - Nick McKim:

“The so-called independence of the Reserve Bank is just a great big lie told by Labor and Liberal treasurers over decades.”

MIKE:

So, the bank announced its decision. Jim Chalmers came out and behaved pretty much exactly as McKim predicted he would. He held a media conference in Brisbane and uttered variations of the I word, i.e. independent or independents, seven times in the space of about a minute in response to questions from the media.

Audio Excerpt - Jim Chalmers:

“I don't pre-empt and I don't second guess decisions taken by the independent Reserve Bank. I’ve made that very clear…”

MIKE:

And he went on to stress that the government's legislation, which is stalled because of the Greens action, were about trying to make the Reserve Bank more independent, not less so.

Audio Excerpt - Jim Chalmers:

“These decisions are taken independently by the reserve bank. My efforts have been about trying to make the bank more independent, not less independent. I respect and cherish its independence. They’ve taken this decision...”

DANIEL:

So Chalmers is saying that the bank is independent. Nick McKim is saying the exact opposite. Who's right here, Mike?

MIKE:

Well, as a debating point, I think you'd have to say McKim was right. I mean, it's in the Act. Section 11 of the Reserve Bank Act provides that the Treasurer can overrule a bank decision. But there's a somewhat convoluted process involved that includes a requirement that the bank should produce a statement, and I'm quoting here, a statement in relation to the matter in respect of which the difference of opinion has arisen. So, in other words, when the bank and the government aren't getting on, there has to be a public airing of why they're not getting on. I would suggest that's perhaps one reason why no Treasurer has ever used the power because, you know, it would bring on an enormous public stoush. The other reason I think that it's never been used is that Australia has not experienced a major economic crisis in which the bank and the Government were seriously in conflict.

DANIEL:

So the Greens are emphasising, in relation to this, that the Government could tell the Reserve Bank to lower rates. Like you said, it's never happened before and there's no signs that it will happen again, which makes it an interesting political choice by the Greens to run this line. What did you find out about why they're pushing this particular line of argument?

MIKE:

Well, I called a number of people from the Greens party room because I wanted to know why they decided to take this tack. Some of them spoke on background. I think probably the most telling, though, was the person who didn't speak, and that's the Senator Peter Whish-Wilson, who politely but firmly declined through his spokesperson to get involved. And I think this is interesting because he's a person with pretty serious economic credentials. He's one of a couple from the Greens party. He is one, the other is Barbara Pocock. Whish-Wilson has a master's degree in economics. For almost eight years until he entered Federal Parliament in 2012, he taught university economics. Before that, he worked as a banker and a broker for more than a decade with Merrill Lynch on Wall Street and with Deutsche Bank in Hong Kong. He was also the Greens finance spokesman between 2015 and 2016, and then he became the party's Treasury spokesman, which is a position he held until September 2020 when he was reshuffled out of the role by the new leader, Adam Bandt. So, you know, he's, a fairly serious voice on the matter. And the fact that he's choosing to stay schtum on this, I think, suggests that maybe he's not entirely in agreement. Nonetheless, you know, I rang him thinking that he might have some pertinent observations to make about this insistence that, you know, politicians are more to be trusted on interest rate setting than the, you know, econo-crats of Australia's central bank, which is a pretty extraordinary thing that to posit, I would suggest.

Whish-Wilson isn't talking, but certainly others in the Greens party room are uneasy about the line their colleague, you know, the Treasury spokesman Nick McKim, has taken. Some of them wonder if it was necessary to pick this particular fight with the Government. They worry that Anthony Albanese's line, that the Greens and the Coalition parties have formed what he calls a no-alition to stymie, not just this but a number of other bits of government legislation in the Senate, they worry that that line is getting a bit of traction.

DANIEL:

After the break, the political calculation behind the Green’s demand.

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DANIEL:

Mike, you've been speaking to a lot of Greens about the Reserve Bank and their demand that the Government force interest rates down. So, can you tell me about what you found out about how they landed here?

MIKE:

Well, how it happened was that the Government ordered a review into the Reserve Bank. An independent review, and it reported back last year with 51 recommendations, all accepted by the government. The government was planning to legislate and, until very recently, had been working with the Coalition to implement the reforms. And things seem to be going swimmingly. Jim Chalmers made some amendments to take account of opposition concerns. And then, quite suddenly and recently, without any notice, the Coalition parties just walked away from the deal that was very close to being done. So, what this means is that suddenly the Government needs the Greens and the crossbench if it's going to get its reforms through the Senate. And the Greens are concerned with a couple of provisions in the legislation, particularly with the idea that Section 11 of the Reserve Bank Act, the one that gives the Treasurer power to overrule the bank and extraordinary circumstances, is to be abolished. And this is, of course, the very part of the act that McKim is wanting the Treasurer to use right now.

His Senate colleagues have gone along with him. He told me this was a party room decision arrived at through the, quote, normal processes, unquote, and taken within the past couple of weeks. But another source tells me that, in fact, there had been differing views expressed in the party room. Nonetheless, it was decided that the party would block the RBA reform legislation in the Senate until interest rates began coming down. Then it would wave most of the changes through, but it would insist that Section 11 was retained. That was agreed. McKim went out, but he went further than a lot of his colleagues were expecting. He went out and demanded not just that Section 11 be retained in case of some future crisis, but that the government should immediately use it. And that, a source told me, was not how some of us expected it to be announced. They thought the government should retain that Section 11 power, but saying it should be used immediately were quite different things.

DANIEL:

Right so, Senator Nick McKim has gone beyond what his colleagues agreed to and beyond what basically anyone else, either inside or outside the party, is calling for. What does he have to say about that?

MIKE:

Well he's not taking a backward step. When it was put to McKim in an interview with the online news site Crikey this week that he was, quote, pretty alone, unquote, in his demands, he said, and I'm quoting, I can't help it if the neo-liberal worms have consumed the minds of other people. That's their problem, not mine. So, you know, pretty bolshie stuff. And of course, after the interest rate decision came out on Tuesday, within minutes, into my inbox plopped a press release from Kim's office in which he said a number of things that drove it home to the Labor Party, one of which was Labor is watching the Reserve Bank drive people to the wall and doing nothing. So there's a good measure of ideology here, but also a pretty good measure of politics as well.

DANIEL:

You mention politics. This sounds like there's a fair degree of politics in all of this, Mike. How is this playing out politically for the Greens?

MIKE:

Well, one columnist called it Trumpist, suggesting that it was very like the sort of thing Donald Trump might come up with. And I might add that this particular columnist was not a notably right wing one, but, you know, centre left. Another headline suggested that the Greens were advocating a hostile takeover of the Reserve Bank. So, you know, you kind of get the tone from that. It has not been well received pretty much across the board.

DANIEL:

So what does this tell us about the Greens overall strategy when it comes to dealing with the Government? How are they approaching working with Labor and are they having the kind of impact that they want to have?

MIKE:

Well, I spoke with the Greens leader Adam Bandt about all this, and he said that this wasn't some knee jerk move or simplistic attack on the RBA. He pointed to a, quite a long list of other things that he said the Government could do that might actually obviate the need to lean on the Reserve Bank to lower interest rates. You know, he said that if the Government did things like introduce divestiture powers to break up supermarkets that were gouging; if it brought in a super profits tax; if it did something about negative gearing; if did a whole lot of things that that the Greens think are fuelling Australia's current inflation and cost of living crisis, then there may be no need for the Reserve Bank to use the, frankly, blunt instrument of interest rate rises to try and deal with inflation. But all of this suggests to me anyway that the Greens, maybe not including Nick McKim, but the Greens generally are not really that serious in their demand that Jim Chalmers take control of monetary policy away from the Reserve Bank. Rather, they’re kind of using this for leverage to make a point about not monetary policy but fiscal policy and government policies more broadly. And, of course, to make political capital on the way.

DANIEL:

Is there a risk that the government will just peg the Greens as being obstructionist or fringe? And that sort of framing of that narrative could hurt them politically?

MIKE:

Well, the Government is certainly portraying them in that way. There's a raft of quotes on the record in the past week or so from, you know, Chalmers.

Audio Excerpt - Jim Chalmers:

“You know, the Greens, their primary task is to, you know, make up numbers and put out press releases and we actually have to run the place. Run the economy…”

MIKE:

Katy Gallagher.

Audio Excerpt - Katy Gallagher:

“On the Reserve Bank legislation, I mean, the Greens are out of control.”

MIKE:

Anthony Albanese.

Audio Excerpt - Anthony Albanese:

“What the Greens do is engage in populism, often in conjunction with their partners in the no-alition, the Liberal Party and the National Party.”

MIKE:

So certainly the government is doing its best to whitehand them. Whether it works or not, I don't know. I mean, they have clearly been appealing to a certain part of the demographic, particularly those young people who are locked out of the housing market, and I would note that, you know at the last election, the Greens had a record result. They did better than they ever have before. And the way the polls are looking at the moment, it could well be the case that neither of the major parties gets a majority in its own right in the Parliament and that could place the Greens, you know, and the teals and assorted other crossbenchers, in a position of great power to decide what gets up and what doesn't. As to how this will play out, whether it does them good or not, I don't know. Your guess is as good as mine. But I would leave it by quoting one of the party sources that I spoke to who said, the politics of this is that people don't know what these changes are about. They're bloody pissed off about their interest rates. If that's the message that gets through, it's probably not a bad thing for the Greens.

DANIEL:

Mike, thank you so much for your time.

MIKE:

Thank you for yours.

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DANIEL:

Also in the news today...

Australia has joined the international call for an immediate 21 day ceasefire across the Lebanon-Israel border to provide a safe space for diplomacy.

The joint statement was negotiated on the sidelines of the UN General Assembly. It says the recent fighting is "intolerable and presents an unacceptable risk of a broader regional escalation".

It comes as the chief of Israel's army said the IDF was preparing for a ground invasion into Lebanon.

And,

Qantas travellers have been put on alert for flight disruptions as engineers at Melbourne Airport walked off the job on Thursday morning.

Members of the Qantas Engineers’ Alliance are pushing for a 15% pay rise following more than three years of wage freeze.

The strike is expected to roll out across all major airports during the next two weeks.

7am is a daily show from Schwartz Media and The Saturday Paper, and hosted by me, Daniel James, and Ruby Jones.

It’s produced by Cheyne Anderson, Zoltan Fecso, and Zaya Altangerel.

Our technical producer is Atticus Bastow.

We are edited by Chris Dengate and Sarah McVeigh.

Erik Jensen is our editor-in-chief.

Our mixer is Travis Evans.

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

That’s all for this week, thanks for listening.

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