Treasurer Jim “chicken” Chalmers has injected a whole new level of uncertainty into interest rates.
His tax and spend economy has hoodwinked the RBA (not that that was hard).
His immigration obsession has led the RBA backwards to its misunderstanding of wages from the last cycle.
His energy rebates have paralysed monetary policy expectations.
Now, the Chicken is taking it up a notch!
Australia’s surprise late-night passage of legislation that will split the Reserve Bank’s board into two entities may pave the way for it to reveal votes similar to the Federal Reserve, while also raising uncertainty over the future path of interest rates.
“The new monetary policy board is key — who will be on it, who transfers over from the current board, how many new members and their background,” Su-Lin Ong, chief economist at Royal Bank of Canada, said Friday. “It will likely take some time for markets to assess where on the spectrum of dove/hawks the members sit.”
The composition of the new monetary policy board, which will take effect following the RBA’s Feb. 17-18 meeting, is still unclear. Bullock, Deputy Andrew Hauser and Treasury Secretary Steven Kennedy will be on the body while the other six external members — who are currently mainly drawn from business and academia — will be appointed by Treasurer Jim Chalmers.
It is possible that many of the current external members will move to the new governance board, opening up slots for new appointees to the monetary policy committee. Bullock has previously said that she’s had discussions with current board members to gauge their preference while adding she’d want some “continuity” on both of the new bodies.
“The changes raise the uncertainty around the RBA’s reaction function going forward given potential new board personnel,” economists at Goldman Sachs Group Inc. wrote in a note to clients.
The RBA is the same worker-hating egghead it was in the last cycle. As well, Chalmers is a proven political hack so the forthcoming election may play a role.
Both of these raise the prospect of labour appointees to the board to doven it up.
More broadly, a comment has to be made about the Chicken’s sense of timing.
We are at the threshold of a tariff war that will spill over into a global currency war dead ahead. This will inject significant price volatility into Australia’s terms of trade, most notably for goods imports but likely commodity exports as well.
We have an impasse between the government and the central bank on what even constitutes inflation. Is it the headline rate or trimmed mean rate?
The Aussie economy has been in per capita recession for 2.5 years, an unprecedented modern depression as the government wars with the RBA over gas cartel energy shocks, with another underway now.
Is this the time to totally restructure the central bank and inject broad uncertainty about everything that it does?
Chicken Chalmers should ask Kwasi Kwarteng for the answer.
