Isn’t it curious that the conservative side of politics, the free-marketeers, are now at loggerheads with the banks. All the more so with a leader who is an ex-merchant banker.
It was the previous Treasurer who defended so fiercely the independence of the Reserve Bank, and indeed took much of the credit for it. Despite such affirmation of independence, when meeting times came around and interest rate determination was on the agenda, it did not inhibit the Coalition from giving thinly-veiled advice to the Bank Board. “There is no reason for a rate rise” was often heard from the PM and Treasurer at times when they feared another. But apart from these mild indiscretions, the Board was left to do its job, and it seemed to do it irrespective of what the Government said, even increasing the base rate during the 2007 election campaign.
Yesterday Joe Hockey lambasted the Reserve Bank during a radio interview. He questioned the judgement of its members. He insinuated that they had made a misjudgement when they had previously increased the base rate, especially during the election campaign, and implied that they were now correcting that mistake. His questioned why increasing interest rates to bring down inflation had given way to now reducing them even although inflation was still unacceptably high. As Shadow Finance spokesman, one would have thought he would have noticed the monumental change in global financial markets from last year, a change that required a shift from curbing inflation to stimulating a slowing economy. He sounded angry. Anger in defeat has been a feature of the behaviour of some Coalition members, Joe Hockey and Julie Bishop prominent among them. His outspoken condemnation would not have gone down well with the Board Governor, Glenn Stevens. I heard no correction of Hockey’s outburst by Malcolm Turnbull.
But Turnbull too has taken aim at the banks, the commercial ones. His insistence that they could afford to pass on the full rate cut, and his self-congratulatory assertion after they passed on 0.75 to 0.8% that they must have done so as a result of his pressure, would not have impressed the banks. Indeed Saul Eslake, chief economist of the ANZ Bank, labelled his utterances as just political populism. Most commentators agreed; just a few thought it was smart politics. Turnbull’s characterization of the banks as greedy, something he says he knows about as he’s been a banker, must have been a calculated move.
So why would the Opposition, especially with an ex-banker as its leader, set out to upset the banks and the Reserve Bank at that? Presumably it was based on an assessment that more would be gained politically by being anti-bank. It’s a dangerous gamble. Unless swinging voters move toward the Coalition as a result, and the polls so far give no indication that this is so, Turnbull and Hockey, with Bishop trailing well behind, will have gained nothing, and lost favour with the commercial banks who would be less inclined to support the Coalition financially, and more significantly the Reserve Bank, alongside which every federal government has to work in managing the nation’s finances.
But perhaps political judgement is being distorted by Turnbull’s ego. There has been much talk about it since he entered parliament, but any doubts about its size will have been dispelled during the rate cut discussions. His interview with Fran Kelly on ABC Sydney radio left her astonished that he could be so confident that he’d influenced the banks; the only concession he was prepared to make was that he couldn’t say how much. If Turnbull’s ego overrides his political common sense to that extent, we shouldn’t be surprised at similar lapses in the future. The pity is that while the focus is on his ego, either because he makes it so, or because the media home in on it, he's not engaging in meaningful debate about the diverse factors that contribute to the global financial mess we’re in. As Wayne Swan put it: “...there are some events in the world which are much bigger than Mr Turnbull’s ego." Whether Malcolm is able accept this may determine his future.