Has anyone stopped to think what the Reserve Bank is really up to in dropping interest rates last year and then raising them so much and so often a few months later?
I remember studying economics years ago at school with a teacher who couldn’t in all truth tell a supply curve from a demand curve. But because we were very much programmed to memorise textbooks like Brown’s Economics and some of Samuelson’s tome I made it through the HSC exam OK. My understanding of economics was zero but I could pick the right curves!
I ended up doing three years of Economics at University. In third year, there were six of us in the class and our professor at the University of New South Wales, Dr Fu Chi Lui was excellent.
Somewhere along this study path, I came into contact with the role of the Reserve Bank – it went something like this: “The Reserve Bank Board's duty stated in the Act is to ensure the Bank's monetary and banking policy is used to help the Australian population, particularly with the economic prosperity and welfare of the people of Australia”.
Over the last few months I’ve seen a lot of Australians looking stressed by the last five rate rises since October and anxious about the probable onslaught of more rises. And I’m talking real stress and panic here. Remember, before the falls last year, Australian borrowers were forking out big money due to continually increasing rates so there’s been a history of interest rate pain.
A couple of things I know about interest rate policy – first, it works with a lag, which means they can raise interest rates today but it could take six months or more to work. Second, because of the lags, it is always guesswork how many rises are needed. That’s why with the last increase economists were split 50:50 on the increase – some said the RBA would raise but they shouldn’t! So when we hear economists predict a rise, not all of them are saying there should be one. More correctly, they are second-guessing what the RBA will do. It could be said that these people who make up the RBA board are effectively playing Russian roulette with Australians’ incomes and lifestyles.
I didn’t watch the Bank’s governor do his public relations stunt recently but I did do a little digging of my own to see the type of people who make these decisions that are supposed to help us Aussies.
Now, to my knowledge, no woman has ever been a governor of the Reserve Bank since its inception in 1960 and certainly not in its previous life as part of the Commonwealth Bank. And as I look through the list of current board members, there are three ex officio members – Glenn Stevens, Rick Battellino and Ken Henry. There are also six external members – five men and one woman, Jillian Broadbent, who has been on the board since 1998 and whose term ends in 2013! That’s the longest term that I could see for any of these Reserve six – does that mean that once you get a woman on board you don’t want to lose them?!
My final question is – how can any board make decisions in the best interests of the Australian population when there is one woman on the board?
I think I was the only woman in my final year university economics class of six students, but we’re not living in the seventies now.
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