Working Papers

Glenn Milne’s Thinly Disguised Class Warfare

Glenn Milne joins the tabloid attack on Glenn Stevens, complaining that the RBA Governor is not phoney enough:

Central bankers might argue that they’re not meant to behave like politicians. But the reality of public life is that if you are the individual who is seen to have the power to decide whether people keep a roof over their heads, you must behave in an accountable fashion, or at least pretend to.

Stevens is not behaving in this way.

The whole point of having an independent central bank is to have economic policymakers who will tell it like it is and not give in to economic populism.  Milne says that ‘Stevens now has few friends in Canberra.’  That is how it should be.  A more adversarial relationship between the RBA and politicians would strengthen, not weaken, public accountability in the conduct of economic policy.

Then there is this bizarre and nonsensical bit of parochialism:

Stevens, with his Teutonic lustre and mid-Atlantic conference accent, comes from nowhere recognisable in the Australian suburban landscape…

Glenn Stevens can do no more about his appearance than Glenn Milne.  Stevens actually looks and sounds more authentically Australian to me than Milne, but what of it?  Milne is indulging in thinly disguised class warfare.

The unfortunate consequence of these tabloid attacks is that it will make the RBA’s senior officers even less willing to maintain a public profile, weakening the very accountability Milne says he is in favour of.

posted on 07 April 2008 by skirchner in Economics, Financial Markets, Politics

(11) Comments | Permalink | Main

| More


I agree, it is bizarre and ridiculous, especially considering the basis for the article was a whinge by the executive chairman of David Jones. If there’s one business that is going to suffer fall-out from a necessary downward shift in domestic demand, it is DJs. Hopefully, Swan will put the Wavish letter in his bottom drawer and keep his mouth shut. Milne should go back to abusing other journalists.

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  11:59 AM

Actually Myers, but your point is still valid.  Weaker retail sales tell us no more than that monetary policy is doing its job.

Posted by skirchner  on  04/07  at  12:39 PM

Could you expect any better from the poison dwarf?  He probably doesn’t know what to do with himself now that Costello has (apparently) opted out of politics.

I don’t have a problem with Stevens.  He’s doing what his charter says he should do.

My biggest gripe with the RBA is that its accelerating Australia’s transformation into a quarry by putting upward pressure on the exchange rate.  If the commodities cycle turns (as you disciples of Julian Simon say it must) then what will Australia have to sell the world when it does?

Many of the non-resources exporting businesses that started life during the late-90s/early 2000’s period when the AUD was weak are currently shinking rapidly or going out of business completely.  Its increasingly likely that these businesses won’t be around to take advantage of a more favourable exchange rate environment in the future.

It occurs to me that transforming Australia into a quarry makes our economy more vulnerable large movements in the commodities markets.  Is this a good thing?

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  12:44 PM

As David Gruen would say:

“The higher exchange rate plays a shock-absorber role for the domestic economy, imposing restraint on the non-mining export and import-competing sectors of the economy — manufacturing, services and agriculture (though the agricultural sector has been cushioned by rural commodity prices rising faster than non-rural commodity prices over the past year). The higher exchange rate also facilitates the reallocation of labour and capital to higher value uses in the economy.”

Posted by skirchner  on  04/07  at  01:54 PM

Restraint?!  I’d be more inclined to call it a “crushing burden”.

I wonder if David Gruen would be so sanguine if similar “restraint” had been placed on Treasury economists?  Perhaps he has a “higher value use” driving a mining truck.

I know all this is just the market at work, telling us that Australia’s competitive is digging stuff out of the ground, and for God’s sake stop making things, but that ignores my quesion:  Will the Australian economy become more exposed to commoidity price movements in the future?

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  02:16 PM

Would rather be exposed to commodities than competing with India to produce $5000 cars!

Posted by skirchner  on  04/07  at  02:25 PM

Well no, but Australia is rapidly turning into a one-track economy at the moment.  We can certainly compete globally in high value products and services if given a chance, but right now Australian businesses can’t compete in anything (apart from resources) thanks to the strong dollar.

Look, I’m resigned to it happening.  I’m not advocating that government puts pressure on the RBA to lower interest rates for the sake of exporters, I’d just like it acknowledged that the “heroes” of the Australian economy (as Stephen Mayne puts it)—the exporters—are innocent bystanders in all of this.  We’re not the ones bingeing on credit and creating excess demand, but we’re getting thumped harder than anyone by this very blunt instrument.

Are you seriously suggesting that the RBA intends to hurt non-resources exporters, or is it just a very unfortunate side-effect?

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  02:42 PM

If you’re going to personalise macroeconomic policy, why are non-commodity exporters “innocent bystanders”? A dollar of demand from a non-commodity exporter causes inflation (more or less) as much as a dollar of demand from another business or a consumer. Non-commodity exporters are just as much a cause of inflation as anyone else. Incidentally, most Australian commodity producers have relatively low gearing.

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  03:37 PM

Well I have zero gearing so yes I take it personally, and yes I’m innocent, but that’s not my point.

The RBA is targetting demand through interest rates and that applies equally to everyone.  Fair enough.  But by pushing the dollar higher they are hurting non-commodity exporters more than any sector of the economy.

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  03:54 PM

Additionally, the higher dollar is making imports cheaper, thus encouraging spending on imported items such as the much-maligned plasma TVs.  I dare say, this is the type of spending the RBA would like to dampen, rather than putting low-geared non-commodity exporters out of business.

Posted by .(JavaScript must be enabled to view this email address)  on  04/07  at  04:26 PM

Oh, I just heard about the record $3.3B trade deficit for February.  Naturally, the Aussie dollar headed higher on this news (?!)  I give up.

Posted by .(JavaScript must be enabled to view this email address)  on  04/08  at  08:23 AM

Post a Comment

Commenting is not available in this channel entry.

Follow insteconomics on Twitter