With the US presidential election race hotting up, Reserve Bank governor Philip Lowe has offered a thinly veiled opinion: Donald Trump is second only to the pandemic as a threat to Australia’s welfare.
Dr Lowe is, of course, too diplomatic to actually name Mr Trump, but there was no doubting what he meant in evidence to the House of Representatives economics committee.
The governor was asked what were his biggest uncertainties or concerns. He replied that he had two.
“One is obvious – the pandemic – because the economy will not return to normal until we get on top of the pandemic,” he said.
“Even if we don’t have restrictions, people are nervous, and when you’re nervous you don’t spend and firms don’t invest.”
The second major worry was perhaps not as obvious to the politicians on the committee, as they didn’t care to explore it any further.
Maybe it was too hot for them to handle.
Dr Lowe continued: “Once we get through that (the pandemic), the next big concern is the commitment of the global economies to an open, rules-based trading system.
“I’m sensing a retreating commitment in some countries, which I find incredibly worrying.”
No prize for guessing who has been leading that retreat, trumpeting his nationalist, mercantilist “America First” agenda, withdrawing his country from the Paris Agreement and the World Health Organisation, knee-capping the World Trade Organisation, launching a tariff war with China, never mind the worsening Cold War with the world’s second biggest economy.
And now the febrile President has gone full QAnon loopy – or utterly, indefensibly cynical – by suggesting the “Deep State” is keeping a COVID-19 vaccine under wraps until after the election.
“Australia has benefited from an open rules-based system more than perhaps any other country in the world,” Dr Lowe told the committee on August 14, back when Mr Trump was only maddeningly dangerous, as opposed to dangerously mad.
“It’s the source of much of our prosperity. So if there’s a retreat from that, I think we’ll pay a big price.
“The world needs to come together to solve some really big problems. I’d list there the pandemic, climate change, the taxation of the global economy and dealing with some debt problems in some very poor countries.
“These are issues that are first order that need a global solution, and if we’re retreating from globalisation and the ability to come together, then the global economy will be weaker and Australia will be less prosperous.
“Once we get through the pandemic, we’ll have to deal with making sure that the countries of the world can effectively come together to make sure our economies are strong, deal with climate change, with the taxation issues and with some really chronic problems in some very poor countries, which ultimately could come back to hurt us all.”
Trump’s America isn’t the only member of the “some countries” Dr Lowe alluded to.
Shallow nationalism has been on the rise from Poland to Turkey, Hungary to Brexit Britain, but it is Mr Trump’s performance that has mattered most, has had the biggest impact, poses the greatest danger, and has the most influence here.
Mr Trump’s attitude has been echoed by none other than Scott Morrison during and after his “Best Mates” US tour last year.
“The future does not belong to globalists, the future belongs to patriots,” Mr Trump declared in his speech to the UN on September 24.
A week later, the Australian Prime Minister was decrying “elites”, “negative globalism that coercively seeks to impose a mandate from an often ill-defined borderless global community” and “unaccountable internationalist bureaucracy”.
As a middle-order trading nation, Australia has been made rich by surfing the wave of globalisation, yet “going all the way with Donald J” has taken the relationship with our most important economic partner to its lowest point in nearly half a century. And it’s still declining.
No wonder Dr Lowe is concerned.
The way the RBA’s biannual economics committee hearing works is that the governor makes an opening statement, bringing the politicians up to speed on the state of the economy and outlook, after which pollies of all parties spend a couple of hours questioning the governor and his offsiders, with the aim of winning the RBA’s endorsement of their own particular hobbyhorses, twisting or arguing against the governor’s stance to suit their political purposes.
At the August 14 hearing, not one of them wanted to know any more about those first-order, “really big” problems.
The second-biggest threat to our welfare didn’t grab newspaper headlines the next day, either.
The pollies preferred to charge off on their own tangents that included the super guarantee levy, residential land zoning, states’ stimulus spending, modern monetary theory, state border closures, the RBA selling gold in 1997 and, in the case of Member for Hydroxychloroquine, Craig Kelly, simply displaying he has no idea.
Mr Kelly: On your bond raising – you may have mentioned this earlier, I’m sorry I wasn’t on the earlier part of the call – what’s your schedule for bond raising over the next 12 months?
Dr Lowe: The AOFM does the bond raising for the government, so we don’t raise the bonds for the government.
Mr Kelly: I’m sorry. OK.
Dr Lowe: The staff at the RBA and the AOFM are in close contact. I’m not sure what the schedule is, but the government has already pre-borrowed quite a lot of money.
Mr Kelly: Is there any signal that you’re having difficulty selling those bonds, or is it that, basically, whatever’s put to the market seems to be snapped up quite easily?
Dr Lowe: Yes, the latter. There’s no trouble at all in the government financing itself at the lowest rate since Federation; that is the point I was making in response to Mr Bandt. There’s very strong demand for Australian government debt, as there should be.
Mr Kelly: Our bond rate is now lower than that of, I think, the US, and many other countries as well. Where do we stand internationally on comparative rates?
Dr Lowe: Our 10-year rates are a little higher. At the moment – I think, this morning – our 10-year bond rate is 90 basis points. In the US – correct me if I’m wrong, Chris – it is around 70. So there’s a bit of a wedge there, but the deferential between our bond rates and others is quite low. We’re a little higher.
Unsurprisingly, Mr Kelly (Liberal Party, Hughes) is a Trump fan, sharing the President’s taste for hydroxychloroquine, coal, Russia, conspiracies, failed family companies, and the rabid end of the Murdoch broadcasting business, where he makes regular appearances.
While Mr Kelly is not helping Australia – he is a prime example of what Malcolm Turnbull called the “political terrorists” prepared to blow up his government if they didn’t get their way on pro-fossil fuel policy – he is not of himself a major threat to global prosperity. Donald Trump is.
Not that the Reserve Bank governor would put it that way.