Josh Frydenberg, Australia’s federal treasurer, has defended the Reserve Bank of Australia against criticisms launched by Paul Keating, a former Labor prime minister, that it isn’t doing enough to help amid the COVID-19 economic crisis.
“This was a very nasty, personal, vindictive, unnecessary, misguided attack by Paul Keating,” Frydenberg told ABC News Breakfast on Sept. 24.
“The Reserve Bank has done very well through this crisis. Unlike other crises they didn’t have room to move on monetary policy.”
Frydenberg said the Reserve Bank pumped $75 billion worth of liquidity into the banking system to stabilise it and purchased $60 billion worth of government bonds from secondary markets.
Keating, however, wants the Reserve Bank to purchase bonds directly from Treasury. But doing this would “undermine the credibility of the central bank,” according to Warrick McKibben, a former RBA board member.
“This is a recession where it’s fiscal policy that really needs to take the lead,” Prof. McKibbin told News Corp’s The Australian.
McKibbon said that it was Keating’s policies when he was treasurer in 1991 that caused the last recession.
Frydenberg’s remarks come in response to a letter Keating reportedly issued to some media in which he criticised central bank officials for lacking the courage to break with “economic orthodoxy” to help make the government’s funding task “much easier and support for the country better.”
“It has to be remembered, these are the high priests of the incremental,” Keating wrote, as reported by the ABC.
“Making absolutely certain that not a Bank toe will be put across the line of central bank orthodoxy.
“Certainly not buying bonds directly from Treasury—wash your mouth out on that one—what would they say about us at the annual Bank for International Settlements meeting in Basel?”
Keating also wrote that the Reserve Bank should fund “mountainous sums” of fiscal policy to help the government through the COVID-19 crisis.
Frydenberg defended his remarks on Keating in the media, suggesting to ABC Radio and Nine’s Today program that Keating’s comments were triggered by the Reserve Bank governor’s speech about the trade-off between wages and the superannuation guarantee two weeks earlier.
Labor and the Coalition have been debating the legislated superannuation guarantee increase that determines the rate of money Australians pay into their compulsory retirement savings.
Labor wants it to increase to 12 percent—as the prime minister promised during his election campaign—but the Coalition want it to remain at 9 percent.
The Coalition argue the increase would mean less take-home pay for workers which would lower their standard of living pre-retirement.
Gerard Rennick, a Liberal Nationals senator, told the Australian Parliament on Aug. 27, the issue highlighted the core difference in philosophy between the left and right sides of politics.
“Many people are left wondering what is Paul Keating’s motives behind this nasty, unnecessary attack,” Frydenberg said
“The Reserve Bank is independent and he shouldn’t be attacking the bank like he has.”
As the COVID-19 pandemic impacted the health and economy of Australia, the federal government implemented a range of measures to protect the country on both vectors. Prime Minister Scott Morrison said on Aug. 7 that the government’s wage subsidy efforts will cost more than $100 billion.