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Josh Frydenberg goes full Trump on the Reserve Bank

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RBA Headquarters, Martin Place Sydney (Image by Danausi, Wikipedia Commons)

Josh Frydenberg roped RBA Governor Phillip Lowe into belting out a rendition of ‘Everything is Awesome, writes Tarric Brooker.

WHEN FACED with criticism or hard questions about the state of the economy and the current economic downturn, the Morrison Government has developed a very simple narrative to base its responses around: ‘Everything is Awesome’.

Despite a number of economic indicators ringing alarm bells and warnings from the Reserve Bank that interest rate cuts alone were going to be insufficient to get the economy out of its current downturn, Prime Minister Scott Morrison and Treasurer Josh Frydenberg continue to insist that the “fundamentals are strong”.

Meanwhile, back in reality, the RBA has already cut interest rates twice, in its only two meetings since the Federal election, to the lowest levels in the history of Australia and ratings agency S&P is considering removing Australia’s coveted AAA credit rating — unless the Morrison Government can somehow manage to produce a surplus.

With such high stakes and the short-term future of the economy on the line, Frydenberg recently seemingly roped in RBA Governor Phillip Lowe into belting out a rendition of ‘Everything is Awesome’, in an attempt to convince the public that there was no threat of a damaging economic downturn.

There is another prominent leader who has attempted to coax the head of his central bank into dancing to his tune, U.S. President Donald Trump. Since he entered office in January 2017, President Trump has attempted to influence the U.S. Federal Reserve to support his economic narrative and make changes to monetary policy that would benefit the Trump Administration.

Before his meeting with the Treasurer in May, during an address to the Committee for Economic Development of Australia in Adelaide, Dr Lowe said: 

"It would, however, be unrealistic to expect that lowering interest rates by a quarter of a percentage point will materially shift the path we look to be on,"

Up until his meeting with Treasurer Frydenberg, Dr Lowe had been calling on the Government to deploy some sort of stimulus package, in the form of increased infrastructure spending, in order to support the RBA’s rate cuts in boosting economic growth.

After their meeting, however, Dr Lowe’s conclusions about the direction of the economy and the Coalition’s economic management seemingly shifted. With Lowe declaring the economy is growing and the fundamentals:

“... are strong… more Australians have jobs today than ever before in Australian history. That’s a remarkable achievement.”

Quite a remarkable turnaround from the RBA Governor, who just last month said:

“... fiscal stimulus and policy changes to support business investment needed to be considered to maximise national prosperity."

It’s rather clear why Josh Frydenberg "rolled out" Dr Lowe to support the Coalition’s economic narrative. After more than two decades of claiming to be the “superior economic manager” of the major parties, the nation faces the very real possibility of a recession.

During the campaign for the recent election, the Coalition’s key promise was that it was going to deliver the first surplus in over a decade. But with an economy in its third quarter of a per capita recession and other economic indicators sounding a clear warning all is not well, the possibility of a surplus grows more elusive by the day.

As a surplus becomes more unlikely and the Coalition’s “superior economic manager” narrative hangs in the balance of a faltering economy, one can expect the “rolling out of the RBA Governor to support the government to be just the first of many steps taken in an attempt to kick-start the economy, without losing the AAA rating and driving the budget back into deficit.

With two interest rate cuts already expended and the Morrison government reticent to risk its chance at a precious surplus on stimulating the economy, it’s not hard to imagine the government’s inaction forcing the RBA into making further rate cuts, or even enacting unconventional monetary policy in order to keep the economy going.

It seems that when there is a surplus at stake and nearly three decades of a near legendary narrative of superior Coalition economic management, the Morrison Government and Josh Frydenberg don’t seem to mind embracing their inner Donald Trump.

Tarric Brooker is a freelance journalist and political commentator. You can follow him on Twitter @AvidCommentator.

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