Why did Glenn Stevens attend Cabinet?

By in Australian interest rates

| 49 comments

From the ABC:

ELEANOR HALL: It’s interesting one of Joe Hockey’s WA colleagues yesterday criticised his own government’s focus on debt and deficit, saying the real focus should be on growing the economy and jobs, but is that a fair criticism?

CHRIS CATON: In my view that’s absolutely fair. The idea that we have excessive government debt in Australia has always been nonsense.

The idea that it would be nice if the deficit were smaller than it is, that’s an idea worth pursuing, but it’s very very difficult to do anything right now to bring that deficit down with the economy as soft as it is.

ELEANOR HALL: And how concerned should we be then about deflation?

CHRIS CATON: Well, Australia doesn’t really seem to catch this disease to the extent that other countries do.

You look to Europe when in the past year the CPI’s (consumer price index) in negative territory; Australia’s a long way from deflation and I don’t think that should be a major concern.

ELEANOR HALL: Now Joe Hockey was also trumpeting a major break in convention yesterday, with the RBA governor Glenn Stevens attending the party room meeting.

You’ve been a strong defender of the independence of the central bank, does this compromise this independence?

CHRIS CATON: I doubt that very much indeed. You know, I doubt they took Glenn out the back and beat him with a rubber truncheon.

My suspicion is that he was there as a source, if you like, to provide the party room with his assessment of how the Australian economy is travelling.

I doubt very much whether he was summonsed and was there under any duress whatsoever.

ELEANOR HALL: Did it surprise you the way the Treasurer was trumpeting this though?

CHRIS CATON: Yes (laughs).

ELEANOR HALL: Explain?

CHRIS CATON: Well, the Government’s entitled, if you like, to ask anybody what they think is going on and I don’t see this is as compromising.

Giving him the opportunity to explain to the Government how he sees things are going, to me, is hardly compromising his independence.

Australia doesn’t have excessive public debt so long as you ignore the public guarantee of the enormous private debt. If Labor were to gain power guess what? The cuts would be redistributed but they’d still come.

But I digress. What was Capt’ Glenn doing in Cabinet? I have no issue with it in terms of independence but I wonder what it portends. Was he invited or offered to come?

If the latter then that is surely not a good thing. He wouldn’t be there to celebrate how well it’s all going. He could there to brief and prepare the Government for forthcoming trouble.

If the former, it’s not so bad, I guess, though shows that Cabinet is seeking answers, which rather suggests it’s a bit lost on ye auld economy.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. sathiy

    Government has treasury to advice on economic matter. Furthermore the Secretary to the Treasury attends all RBA meetings.

    Looks very irregular? If the Secretary to the Treasury also attended, it could be an economic crises or currency war talk?

  2. C.M.BurnsMEMBER

    The willfully ignorant leading the self-deluded leading the willfully ignorant.

    What could possibly go wrong ?

  3. ceeMEMBER

    Yep – collusion or coercion going on here. Cliffs Resources Goncalves was right – even if he should probably be trying to run his own business.

    CB independence myth shattered.

  5. The Patrician

    Maybe Glenn was telling Joe and the cabinet how “NG for existing dwellings” is dangerously driving up house prices and encouraging record-breaking unproductive malinvestment while costing the govt billions of dollars a year in revenue foregone……..but I doubt it.

    Sack Stevens. Hire Wheeler.

    • Andy!

      Joe Stevens same same. Both pro property boom, both pro rampant debt. Proof is that rates would not be this low without heavy MP otherwise.

      • Ortega

        No other options for them, I believe this 100%. So the foot is to the floor.

        What is the long term strategy?
        Will we break through the five foot titanium wall in front of us with with ever lower rates?

        We’ve been doing this for ages, the entire world has. It doesn’t work. The evidence is in the fact WE NEED TO KEEP DOING IT. (mad).

        Wall ahead. 🙂

        SPLAT

  7. 3d1k

    I think Stevens should address the joint Houses of Parliament and tell it like it is.

    And then a separate week long session with the loons in the Senate and maybe, just maybe, he could get them to rise above their sense of self importance.

    No hope with Lambie I expect. She’ll diverge and go Retard over veterans benefits. Cos she’s such a vet.

  8. sathiy

    Australia has an inverted yield curve, but nobody is willing to call the probability of recession in 2015/16.

    Luck country legend live on………..

    Complacency?

    Australia 1Y

    1.976

    Australia 2Y
    “1.940”

    Australia 3Y
    “1.916”

    Australia 4Y

    “1.961”

    Australia 5Y

    2.043

    • Tea Merchant

      @sathiy your posts are intriguing….. are you able to explain to the blog community here further how an inverted bond yield curve is an indicator of pending recession? These are the higher hanging indicators likely discussed in the cabinet room.

      To my knowledge @Deep T was likely the last blogger to discuss this subject in detail….correct me if I am wrong.

      Great topic and I do note your GDP post below that was well spotted.

      • mine-otour in a china shop

        The ABS deflator calculations will save us from a “real” economic recession. The ABS should look at this in parallel with their unemployment and their/APRA’s housing statistics.

        The deflators used for investment in the upswing and downturn need most attention…..

  10. AngryMan

    I suspect a pair of fetid dingos kidneys could provide better economic policy than hockey at the moment.

  11. greg

    yield curve based on 90-day versus 10 year yield is flat, which suggests weak/no growth, but not really recession.

    Stevens likely telling fuckwit Hockey to pull his head in and stop celebrating. He should be telling him that it’s unknown how many more cuts he can deliver before foreign creditors get antsy and smash the dollar good. Then you start to import inflation…

  12. SupernovaMEMBER

    Well now…..just maybe S & P could be attending…no sorry “invited”, to attend Cabinet meetings next month.

  13. SweeperMEMBER

    Wouldn’t surprise me if it was about housing. Hopefully about winding back NG.
    This was a pretty direct reference:
    “The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market”.

  14. AngryMan

    http://www.watoday.com.au/wa-news/mining-bust-hurting-perth-shows-damage-that-spurred-rba-cut-20150204-1368bn.html

    “This is what an economic hangover looks like. More offices lie empty in Perth, Australia, than at any time since 1996, while the number of homeowners seeking to offload properties has surged 45 percent from a year ago.

    “There’s a couple of reasons for that — one is panic,” said Creagh Ferdinands, an associate at Harcourts real estate agents in the Perth suburb of Joondalup, who’s seeing more properties than usual flooding the local market. “People are thinking it’s going to be a massive slowdown.”