Wednesday, August 20, 2008
Like Lord Voldemort in the Harry Potter novels a “recession” is something that can’t be named.
Instead the minutes of the Reserve Bank board’s August meeting refer to it as a “deeper and more persistent slowing in the economy”.
The last time the Reserve Bank slowed things too deeply and too persistently one million Australians found themselves out of work.
The members of that board will wear the opprobrium forever more.
Just this month the then Treasurer Paul Keating singled out one member of that board – Gordon Jackson, the then head of CSR - as the holdout who refused to let the Reserve Bank board cut interest rates in late 1989...
“In his view, after the property boom, Australia had to take a squeeze,” Keating said.
Gordon Jackson is no longer alive and able to defend himself and so will have his reputation forever sullied.
The damage to the reputation of the present members of the Reserve Bank board should they bring on a recession would be much worse.
The mistakes of 1989 have been documented. The present Reserve Bank Governor Glenn Stevens worked in the Bank’s research department in 1989 and saw what happened.
Working with him in the research department was Warwick McKibbin, now the independent academic on the board.
The head of the Treasury Ken Henry, now on the board as the Treasurer’s representative, was at the time a senior advisor to Keating as Treasurer and watched was happening from Parliament House.
The board members are worried that Australia’s banks made things hard for them last month by pushing up mortgage rates all on their own and they are also worried that economies worldwide are weakening. Very worried.