The Reserve Bank has directly challenged the Treasurer account of the success of his economic stimulus measures declaring that it is hard to know how much credit belongs to them and how much to its own cuts in interest rates and the economic resurgence of China.
The Treasury by contrast has provided Mr Swan with exact estimates of the effect of his stimulus measures which he has used repeatedly in Parliament and in press conferences, asserting that they were responsible for boosting Australia's economic growth by 0.4 percentage points in the December quarter, 0.6 points in the March quarter and 0.9 points in the June quarter.
Mr Swan says that without them economic growth would have been negative in all three quarters pushing Australia into technical recession and costing tens of thousands of jobs.
A Treasury Minute seen by the Age and dated August 25 warns that if the infrastructure measures in the stimulus are withdrawn now around 1 percentage point will be sliced off GDP as the stimulus effect of the December and March cash payments fades.
But the Reserve Bank's September board minutes released yesterday paint a different picture...
While acknowledging that the economy has performed much better than expected, the minutes say board members noted "that it was hard to disentangle the contribution that Asian demand, fiscal stimulus and easier monetary policy had each made to the better-than-expected outcomes".
The minutes paper over a sharp division around Reserve Bank boardroom table between those members who believe the stimulus is responsible for the bulk of Australia's better-than-expected performance and those who believe it is responsible for virtually none.
In dollar terms the Reserve Bank's interest rate cuts have boosted household budgets far more than have the government's bonus payments, cutting the standard variable mortgage rate from 9.45 per cent to 5.8 per cent and slicing $750 per month off the cost of servicing a $300,000 mortgage.
Because these cuts happened at the same time as the government's series of $900 and $950 bonus payments it is genuinely hard to disentangle the effect of the two, something Mr Swan has acknowledged by describing the effect of the suite of stimulus measures as "more than the sum of their parts".
The Treasury is understood to stand by the numbers it has provided to Mr Swan, arguing that it has attempted to measure only the changes that can easily be measured and that as a result its estimates of the effect of the fiscal stimulus measures are conservative.
Treasury head Ken Henry attended the September Reserve Bank board meeting would have had an opportunity to put this position to board members who disagreed.
The minutes point to a board agnostic about the effect of the stimulus and also unconvinced that the time is yet right to start increasing interest rates. The minutes refer to the need for higher rates only "in due course" and note that "uncertainty remains" about Australia's economic outlook.
Market economists yesterday put back their guess as to the timing of the Bank's first rate hike with most now not expecting it until November at the earliest, instead of October as previously believed. Housing commencements unexpectedly fell 3.7 per cent in the June quarter, lending weight to the view that the Bank will wait for clearer signs of a return to economic health before putting up rates.
Published in today's SMH and Age