The body language was not as excruciatingly embarrassing as when Royal Commissioner Kenneth Hayne was forced into a photo opportunity with the Treasurer, but the Reserve Bank Governor’s comments of “support” for the government weren’t far behind.
What a painful two-hour meeting it must have been for Governor Lowe with Treasurer Frydenberg that resulted in the RBA chief doing his best Sir Humphrey “Yes, Minister” impersonation.
For five years Philip Lowe has been asking the government to do more to ensure Australia’s economic future, warning time and again that we can’t rely on interest rates to foster sustainable growth.
But on Thursday, Dr Lowe suddenly had to pretend all was tickety-boo – implying that he’d been terribly mistaken this month, last month, the month before, pretty much all his senior career at the bank.
That’s embarrassing for our “independent” central bank – especially after the mystery of why it held off cutting interest rates until after the election.
The first paragraph of the Australian Financial Review’s report caught some of that embarrassment:
“Treasurer Josh Frydenberg rolled out Reserve Bank governor Philip Lowe to help heap pressure back onto the states to fast-track infrastructure spending and allay concerns about the economy as tax cuts start being received by taxpayers from Friday.”
RBA governors don’t much like being “rolled out” – never mind the inanity of pressuring states on infrastructure spending when it has been the east coast states that having been setting the investment pace while the Federal Government has been of decreasing assistance for the past six years.
But actually considering Dr Lowe’s words – instead of going with the government spin – shows the governor was being about as careful as he could be with his language while sitting beside his boss.
In case you missed it, the famous ‘Hayne handshake rejection’:
“The Australian economy is growing,” Dr Lowe said under Mr Frydenberg’s watchful eye.
What he didn’t say – but is understood by anyone who’s been paying attention – is that it’s growing at the slowest rate since 1992. It’s no longer growing fast enough to reduce unemployment and underemployment. It’s certainly not growing fast enough to get wages growth and inflation up to healthy levels.
“And the fundamentals are strong,” Dr Lowe continued.
Well, yes, Australia’s fundamentals are strong. We are blessed with rich resources presently receiving high prices, we have a relatively young and well-educated work force, we enjoy strong institutions and rule-of-law. These are Australia’s fundamentals – and they have nothing to do with present government policy.
“The outlook is being supported by our (RBA’s) lower interest rates, by your (Frydenberg’s) tax cuts, by higher levels of investment in infrastructure, by a pickup in the resources sector and the stabilisation of the housing market in Sydney and Melbourne,” he said.
Again, yes – the outlook is being helped by those factors. Whether it’s being supported enough, Dr Lowe didn’t quite say. On several other occasions though, he’s suggested it’s not enough. And reading between the lines of the RBA’s economic outlook statement and the Treasury’s own figures, the Stage One tax cuts will barely register with the economy and stages Two and Three are too far away to have much meaning.
As for infrastructure, which Mr Frydenberg proceeded to rabbit on about, it’s the east coast states that have been doing the heavy lifting, but those states are now running into trouble with diving GST collections and the collapse of their housing boom stamp duty collections.
Funding from the Federal Government has been going backwards for six years, a reality two treasurers have tried to gloss over with multi-year headline spin.
Mr Frydenberg’s budget does propose to an increase – but it’s not much of an increase, if any, in real terms. And the tawdry nature of this government’s politics is trying to tie many of the billions to dud projects two state governments specifically don’t want and that have poor business cases.
Meanwhile, back with Dr Lowe:
“But I don’t think we should forget that more Australians have jobs today than ever before in Australian history. That’s a remarkable achievement.”
And it’s a remarkable achievement for Mr Frydenberg to have Dr Lowe say something as palpably silly.
More Australians have jobs today than ever before primarily because there are more Australians than ever before, along with the evolutionary improvement of the female participation rate. It’s as misleading a statement as to say, correctly, that after six years in government, the Coalition has made no dint in the number of unemployed people in the country. Certainly the level of unemployment and underemployment is nothing to boast about.
After that howler, Dr Lowe wrapped his contribution up with:
“And I also agree with you that a priority is to make sure that Australia remains a great place for businesses to expand, innovate, invest and employ people and I’m sure we can do that.”
Motherhood also is a fine institution, the sun rises in the east, bears are known to defecate in the woods and the Pope may well be a Catholic.
Yes, Minister – up to a point.
PS: Just for the record, the number of officially unemployed Australians in September 2013, when the Coalition won government, was 690,300. It was 699,300 when it was re-elected in July 2016. After four months above 700,000, it fortuitously dipped to 682,900 in May – but you wouldn’t want to bet too much on it staying down at that level under present policies. And then there’s under-employment.