Every now and again you come across someone who has genuine authority, no self-interest at stake, nothing to gain, but nonetheless says publicly a devastating truth.
One such incident occurred in the early 1990s, as Australia was emerging from a deep and savage recession. It was said by the then Secretary of the Treasury, and now deceased, Ted Evans.
Evens was an old-style bureaucrat who after retiring from Treasury held a position on the Westpac board. He was smarter than most and was believed to be a close confidant of Hawke and Keating, although I never heard anyone doubt his integrity as a public servant.
In October 1993, he told the audience that ‘unemployment is a matter of choice’ for Australian society. He explained the number of people out of work was a choice, a result of decisions taken. Those decisions were harsh on many, condemning large numbers to the fringe and denying them a ‘fair go’.
In the context of today, with an overheated economy, labour shortages, and an unemployment rate of 3.5 per cent, the statement seems inconsequential.
When he said it in the early 1990s, the situation was very different. The unemployment rate had reached 11 per cent.
Even before that through the 1980s, Australia endured an average unemployment rate of 7.6 per cent.
With so many lives crushed through unemployment, the idea that all along it was simply a ‘choice’, hit Canberra politics with a sobering thud.
The union movement and its political arm, the ALP, have always struggled with unemployment. ‘Solidarity for Ever’ is a concept that puts its arms around all workers, but there is an uncomfortable tension between unemployment and union campaigns for higher wages or restrictive work practices.
As wage costs go up, particularly when driven by union strikes rather than productivity, then the risk is that some workers lose their job or, equivalently, some don’t get employed at all. Solidarity, but not for all.
At a broader level, Ted Evans was highlighting that all government policies have consequences, some of them good and some of them bad. But they all have consequences.
Policymakers point stridently to the advantages of their decisions, yet are more circumspect when acknowledging the downsides like fewer jobs.
A game is played in Canberra at best described as ‘controlled opposition’ where the system permits a level of criticism but with clear limits.
The alternative government (currently the Dutton opposition) is in the former camp, but their critiques are weakened by the obvious self-interest of electoral gain.
The media has latitude as well, albeit the value of access to Ministers is used as a tool to dampen dissent. If journalists go too rogue, then media board members are called.
The mass of critics on social media tend to cancel each other out, but in the event a consensus emerges which is uncomfortable for government, then the platforms are often recruited to silence that dissent.
Then there is a very hard line taken to those who in one way or another draw an income from Canberra largesse but are not considered a part of the controlled opposition.
These prohibited critics are the hundreds of thousands who work in the public services, government-funded agencies, the banks, big ASX listed corporations, large accounting firms, law firms, and peak industry bodies.
Yet it is precisely within these groups that resides most of the impartial expertise to properly evaluate government policies and draw out the negative consequences of decisions.
If unleashed, then we’d get much better policy outcomes as governments would know they cannot easily obfuscate and avoid accountability.
There is a pleasing development on this front with the RBA review final report recommending that the central bank give equal weight to a full employment objective, along with its inflation objective.
The report also calls for strong disclosure:
‘At present, it is unclear how the RBA considers its full employment objective in monetary policy decisions…the RBA should place more emphasis on communicating how it considers its employment objective … In particular, such communication should include … The RBA’s best assessment of full employment at any point time, including the RBA’s estimates of the non-accelerating inflation rate of unemployment…’
The report further recommends that:
‘The RBA should commit to clearly explain how … long employment will deviate from full employment and why.’
There is an unwritten rule that the RBA does not comment on budgets or productivity-related reform details, and the federal government abstains from critiques of interest rates and monetary policy.
The RBA review recommendations will seriously test that gentleman’s agreement.
If the RBA is forced to explain why it is that it has not hit a target within the specified timeframe, then it would seem unavoidable that it cites budget and microeconomic policies as the reason – if it is indeed these policies (or changes in them) which is the cause.
You can’t reasonably hold the RBA accountable for employment outcomes (even forecasts of them) if they are largely influenced by budget and microeconomic policies.
In my opinion, it looks like the RBA will soon be a member of Canberra’s controlled opposition.
Nick Hossack is a public policy consultant. He is former policy director at the Australian Bankers’ Association and former adviser to Prime Minister John Howard.
