Health News at Your Fingertips

Amy Remeikis

How important is psychology in these economic times? Very.

Phil Lowe says the bank is watching that we don’t talk ourselves into a higher inflationary cycle.

(He’s worried that we all keep worrying prices will increase, which could see prices increase in itself because businesses put up prices thinking their competitors are doing it anyway and people expect to pay more. Then workers’ demand higher wages to cover the price rises and businesses increase prices again)

Lowe said:

As I indicated earlier, an important consideration is how inflation expectations and the general inflation psychology in the community evolve. If inflation expectations shift up and businesses and workers come to expect higher rates of inflation on an ongoing basis, it will be harder to return inflation to target – doing so would require higher interest rates and a sharper slowing in spending. It is in our collective interest that this does not happen.

Adeshola Ore

Victorian corruption watchdog says state’s integrity model is lagging behind

Redlich said the report highlighted the weaknesses in Victoria’s parliament’s integrity model which lagged behind other jurisdictions in Australia:

Trust in our politicians is declining and will decline further if real action is not taken. Such action must be included in the clearest standard, reflected unambiguously in codes of conduct.

Glass said the case for reform now was “more compelling than ever”.

Redlich said he was confident Victoria’s parliament would give serious considerations to the reform. But he said cultural issues uncovered in the investigation were a matter for the Labor Party:

How that is dealt with is a matter for the ALP…. the culture of branch stacking is at least 70 years old… It’s a long standing practice and the responsibility for that must lie with leadership.

Josh Butler

Prime Minister Anthony Albanese has stopped short of calling for Australians to work from home if they can, as chief medical officer Paul Kelly advised yesterday in the face of the rising Covid wave.

Yesterday, Professor Kelly said the Australian Health Protection Principal Committee of experts “called on employers to allow work from home if feasible”. Albanese stopped short of endorsing that in a radio interview on Melbourne’s 3AW.

The PM said he encouraged people to stay home if they were sick. But despite repeated questioning about the need for a “clear message” on how Australians should take Covid precautions, Albanese said every workplace was different.

The PM said:

It depends what your work is of course. For many workplaces, they’ve adjusted to be able to work from home, and that’s becoming more and more something that I think is a permanent feature for some businesses… but for many people of course it is simply impossible to work from home to the nature of their work,.

Of course many workers in frontline sectors like healthcare, hospitality and services can’t do their work remotely. But pressed on whether people should work from home if they can, Albanese again demurred.

It depends upon the workplace. Of course I don’t think there’s a prescriptive position that can be put forward but for many people, it’s convenient, they work in occupations whereby they can deliver for their business just as easily working from home… but I’ve got to get out and about for example.

Kelly yesterday said that employers should review their occupational health and safety risks and mitigation plans, and “consider the feasibility of some employees working from home, wearing masks in the workplace and support employees to take leave when sick.”

Albanese will give a press conference from Melbourne shortly.

Amy Remeikis

Phil Lowe says the ‘neutral rate’ is 2.5%

If you’re following the economic news at the moment, you’re going to hear a lot about the “neutral rate”. At RBA deputy governor Michelle Bullock’s speech in Brisbane yesterday, economists were keen to get her views on the neutral rate and how that’s found.

The most basic explanation for the neutral rate (keep in mind I am not an economist or expert, like Peter Hannam or Grogs) is the interest rate which is neither stimulatory nor contractionary. It doesn’t cause any more spending or any less. It just is.

Lowe says the neutral rate is 2.5%.

Adeshola Ore

Press conference on Victorian Ibac report

The Victorian ombudsman Deborah Glass and the head of the state’s corruption watchdog Robert Redlich are holding a press conference in Melbourne about their investigation into allegations of the misuse of public funds and branch stacking in the Victorian Labor party.

The investigation found that two former Andrews government ministers breached parliamentary codes of conduct when they misused public funds to fuel a vast branch-stacking operation, but there was not enough proof they had committed criminal offences to recommend prosecution.

It found the blatant use of public resources in the moderate Labor faction was extraordinary and shocking. No evidence of potential misuse of public funds was discovered within other factions.

Redlich said the report criticises a legislative framework that provides few consequences for abusing public resources:

While we consider the conduct to be egregious, the difficulties in the state of that law are such that we cannot recommend prosecution.

The report tabled in Victorian parliament today made 21 recommendations, including that the government establish an independent parliamentary integrity commissioner, ban MPs from being able to employ family members in their electorate office, and create an offence that would make it unlawful for ministers to allow a person to perform party political work while employed in a publicly funded role.

Three children have died after a house fire in Port Hedland in Western Australia’s Pilbara region.

Police said the fire, on Anderson Street in Port Hedland, had been reported to emergency services about 4.45pm on Tuesday.

Once it was brought under control, firefighters found the bodies of the children inside the house.

Detectives remained at the scene on Tuesday evening. Specialist investigators from the major crime division and forensics will travel to Port Hedland to continue investigations.

There were 15,352 new cases in the last reporting period, and 63 people are in intensive care.

Amy Remeikis

RBA chief warns of danger of ‘self-reinforcing cycle’ of inflation

The RBA governor has told his Melbourne audience that returning inflation to between 2% and 3% is going to be a bit of a challenge.

Phil Lowe points to the global uncertainty – Russia’s invasion of Ukraine and the resulting fuel and oil crises and ongoing supply chain issues being chief among them. But he said domestically, there are also some challenges to overcome – such as household demand. Then there is human psychology and how we respond to rising prices (if you ever get a chance, behavioural economics is a fascinating school of thought well worth your time) and how’ll we’ll react to rising interest rates.

So it’s possible to dampen down inflation, Lowe says:

But the path ahead is a narrow one and it is clouded in uncertainty … We are also paying close attention to the general inflation psychology of households and firms. If people setting prices and wages were to believe that higher inflation will persist, they are more likely to push prices and wages up.

This could result in a self-reinforcing cycle: one in which higher inflation leads to firms being more willing to put their prices up and agree to larger wage claims, which then perpetuates the higher rate of inflation, and the cycle repeats itself.

This is what happened in the 1970s and it ended badly. There is little evidence of such a cycle at present and it is important that this remains the case. The RBA is committed to ensuring that the current period of higher inflation is only temporary and it will do what is necessary to bring inflation back to target. It will be harder to do this if the inflation psychology shifts.

The short version of that – we can very easily talk ourselves into higher inflation, simply by constantly talking about inflation.

No Victorian Labor MPs will be criminally charged despite an integrity investigation unearthing deliberate, extensive and unethical use of taxpayer resources.

The Independent Broad-based Anti-corruption Commission and the Victorian ombudsman have released their joint report into branch-stacking allegations:

Although the deliberate and extensive use of electorate officers and ministerial advisors for party-political purposes was unethical, and offends right-thinking people’s sense of propriety in the use of public funds, the conduct is not sufficiently clearly captured by any existing statutory provision or the common law offence of misconduct in public office.

The investigation was launched after allegations that the Labor moderate faction powerbroker Adem Somyurek handed over cash and used parliamentary employees to create fake branch members and amass political influence.

The practice is not illegal but is against Labor party rules.

There has been an explosive submission to the ongoing inquiry into John Barilaro’s appointment to a New York trade role from his former chief of staff, Mark Connell.

I refer to an incident which occurred in April 2019 … a meeting occurred for the relevant newly appointed ministers responsible for trade and investment.

Mr Barilaro had been appointed the NSW minister for trade, approximately one month earlier, and attended this meeting. Also, in attendance was the then treasurer, the Hon Dom Perrottet and the Hon Stuart Ayres, who was appointed minister for investment.

After this meeting, Mr Barilaro came directly to my office.

He said, ‘I’ve just come from a meeting with Dom and Stuart regarding trade and we’re going to bring back the agent general in London as well as a bunch of other postings around the world.’

He then stated, ‘This is it; this is the job for when I get the fuck out of this place.’

I responded to Mr Barilaro and stated, ‘But, John, the agent general role will be filled well before you retire from this place.’

Mr Barilaro then said, ‘I don’t want to go to London, fuck that – I’m off to New York.’

Barilaro last month withdrew from the position, citing media attention as making the role untenable. He said:

I have always maintained that I followed the process and look forward to the results of the review.

Inflation has increased again in the three months since March, RBA governor says

Amy Remeikis

Morning, everyone! The Reserve Bank governor Phil Lowe is addressing the Australian newspaper’s strategic business forum in Melbourne this morning, where inflation is the word of the hour.

Unsurprisingly, Lowe expects next week’s quarterly update will show inflation increased again in the three months since March. You don’t need to be a governor of a central bank to predict that (or a high school economics student – hi, Ms Driver!) – anyone who has had to put petrol in their car or buy groceries or pay a power bill knows the cost of living has increased.

Lowe’s inflation comfort point is between 2% and 3 %. Australia is at 5.1% and increasing. The bank chief says his job is now to help guide Australia back to the comfort zone, while not impacting employment:

The policy challenge for the RBA is to return inflation to the 2 to 3% target range while, at the same time, keeping the economy on an even keel. We don’t need to return inflation to target immediately, as we have long had, for good reasons, a flexible medium-term inflation target. But we do need to chart a credible path back to 2 to 3%. We are seeking to do this in a way in which the economy continues to grow and unemployment remains low.

Inflation will get worse before it gets better, treasurer says

Jim Chalmers is asked if he has any idea of how many people could find themselves behind on payments, and says he has been consulting with the banks and monitoring the situation as interest rates rise:

Some people have had a buffer but that will begin to erode as interest rates get higher, and the Reserve Bank has made it pretty clear, and the private banks are expecting this as well that Australians need to brace for more interest rate rises. We have got this inflation problem – it will get worse before it gets better, but it will get better, it will moderate next year.

One of the things I want to do in the ministerial statement that I will deliver next Thursday, the 28th, and the parliament is to talk about the things we have working for us – the low unemployment rate for example but also that things working against us, and I think the most confronting aspect of the ministerial statement will be our expectations for inflation, and also the impact of rising interest rates on economic growth.

‘They can’t deal with the whole challenge just by jacking up interest rates’

Asked about what he hopes to learn about the relationship between monetary and fiscal policy from this RBA review, and if “one has been getting it more right in recent times than another”, Jim Chalmers says:

To be fair to central banks around the world, this is a very different type of inflation challenge. We do have strong demand, which is part of the story, and rising interest rates are designed to take some of the sting out of that demand-side pressure.

We have got a lot of supply-side pressures as well. If you think about choked off supply chains, energy and food and security, think about labour shortages. All of these issues on the supply side are making the inflation challenge harder.

Chalmers says it’s the government’s job to focus on supply-side challenges but that central banks can’t can’t deal with the economic challenges only by “jacking up interest rates”:

The job for governments, the responsibility that I accept in the budget before that and after that is to try and deal with some of the supply-side issues. The plan Katy Gallagher and I released is geared precisely at these sets of challenges, about training more Australians, cleaner and cheaper energy, childcare reform so we can get people back to work if they want to do that. It is about investing in infrastructure, particularly digital infrastructure. It is about the sorts of industries that will give us well-paid jobs in the future.

All of that is on the supply side, and that is our job, so to be fair to central banks around the world and Australia, you know, they are dealing with part of this challenge but they can’t deal with the whole challenge just by jacking up interest rates and that’s why we do what we can to influence what we can influence.

‘We have some big decisions to make next year about the composition of the board’

Jim Chalmers says the RBA review will be handed down in March. He is asked about the timeframe for implementing recommendations on changes to monetary policy and inflation targeting going forward:

The timing of being able to act on the recommendations depends on the nature of the recommendations, whether there is a parliamentary aspect to it, whether it requires a different kind of thinking about the appointments and reappointments that are available to government in the course of 2023. It depends on what the panel comes forward with.

Chalmers says he hopes the timing will line up with being able to inform decisions about the composition of the board next year:

Why I have chosen to go at the near and of a reporting date is because I think it is possible to do all this work in that timeframe but we do also have some decisions to make next year about the composition of the board. The best way to factor that in is to make sure – whether it is recognising there is an appointment in May, recognising there is an appointment in August – is to make sure we have the best thinking going forward when we make those important decisions.

Review to focus on future and adopting best practice, treasurer says

Jim Chalmers says he goes into the RBA review with a “genuinely open mind”:

I go into this review with an open mind, genuinely an open mind, about the best combination of institutional arrangements for the Reserve Bank so that we have the world’s best bank relying on adopting world’s best practice, and focusing on the future.

I want this to be a forward-looking overview, all about the best combination of arrangements into the future. I don’t want it to be an exercise in hot shots or second guessing, I don’t want it to be exclusively focused on a backward-looking blame-shifting exercise.

I want to genuinely see it being about how we have the world’s best central bank into the future, and how do we make sure that the institutional and other arrangements are set up as well as they can be to ensure that the right decisions, sometimes difficult decisions, are taken in the future in the interest of Australians and their economy.

Treasurer Jim Chalmers is addressing the media in Canberra after his announcement of the first wide-ranging review into the setting of monetary policy and the Reserve Bank of Australia since the monetary policy arrangements were instituted in the 1990s:

This is an important opportunity to get the ball rolling on the Reserve Bank review that the country desperately needs to make sure that the setting of monetary policy is done it most effectively into the future as well.

The Reserve Bank is a crucial economic institution, which has served Australia well for more than six decades in its current form. We are facing to gather a complex combination of very difficult economic conditions in the near term as well as a range of longer term economic challenges as well. This is our opportunity to ensure that the monetary policy framework is the best it can be to make the right calls in the interests of the Australian people and their economy.

This review will consider the RBA’s objectives, mandate, interaction between monetary, fiscal and macro-credential policy, its governance, culture, operations and more.

Today I will release it – I am releasing the terms of reference for the review as well. This is not about revolutionising monetary policy in Australia, it is about reviewing it and refining it and reforming it. That is my objective.

Reserve Bank appointment extended

Mark Barnaba has agreed to serve another year on the RBA board at treasurer Jim Chalmers’ request.

Barnaba’s five-year term as a part-time member of the board was due to expire at the end of August. It has now been extended by a year, which Chalmers says takes his tenure “beyond the finalisation of a wide-ranging review into the RBA”.

Chalmers released a statement praising Barnaba as:

An accomplished business leader, corporate adviser and non-executive director …

He is the current Chair of the RBA’s Audit Committee, Deputy Chair of Fortescue Metals Group Ltd and in 2015 was named a Member in the General Division of the Order of Australia for service to the investment banking and financial sectors, to business education, and to sporting and cultural organisations.

He is also former chair of the West Coast Eagles and a proud Western Australian.

Joseph Stiglitz pushes windfall profits tax

Nobel prize-winning economist Joseph Stiglitz is on ABC radio this morning after calling on Australia to implement a windfall profits tax.

Stiglitz told the ABC that “the big energy companies didn’t do anything to deserve this, to bring about that increase”.

He has met with government leaders, including prime minister Anthony Albanese and treasurer Jim Chalmers. Asked if there is an appetite for the reform he is calling for, he says there is:

A feeling of constraints imposed by statements that were made in the process of the election. But circumstances change and, when circumstances change, policies need to change.

‘Please come up and say hello if you see me!’

Tory Shepherd brought you that news that the US ambassador to Australia, Caroline Kennedy, will be arriving on Friday.

Here’s the full video where Kennedy introduces herself and announces her imminent arrival: