“Each of those are very difficult. Taxes,cutting back and structural reform. We have to do one of those three things,maybe all three of them,” he said.
You could hear the collective gulp from those assembled or listening in their parliamentary offices. Here was the RBA boss offering some sharp opinions about the fiscal elephant in the room.
But he didn’t just stop with a diagnosis. Lowe offered a timeline on when to start dealing with the issues facing the country.
“I would hope during this term of parliament that you could start addressing probably each of those three things to pay for the services that our community want,” he said.
And before MPs could move on to more RBA whacking,Lowe (thanks to a question from teal independent Allegra Spender) offered suggestions on what needed to be tackled.
The Productivity Commission’sShifting the Dial report provided a welter of options,most of which have yet to be acted upon.
The tax system,from how it affected land use to consumption to savings,was crying out for change.
“Anyone who looks at[it] doesn’t say that’s the optimal system. In fact,they say we’re a long way from optimal on most of those areas,” he offered.
How we chose and funded our infrastructure,the way we trained workers,our education system,the blizzard of regulatory red tape. All needed reform.
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In his central banker way,Lowe noted problems in the regulation of the energy system. “[We] probably haven’t nailed that,” he said deadpan.
Lowe went into the hearing on a hiding to nothing. Despite his protests,he was the one late last year saying interest rates were likely to stay steady until 2024 even as financial markets and some economists were warning inflation pressures were building.
That was before Vladimir Putin’s war and China’s COVID-19 lockdown and US President Joe Biden’s inflation.
It was under his guidance the RBA had interest rates too high before the start of the pandemic,which cost hundreds of thousands of Australians the chance of a job.
And pressed on Friday by outer-suburban MPs representing mortgagors who are feeling real pain due to the RBA’s five rate rises in as many months,the best he could offer was a variation of “if I don’t do this,it’s going to get much worse”.
Lowe and the RBA face a real test as they fine-tune interest rate settings to ensure the economy marches on. But the governor made clear that the nation’s governments also have to carry some of the load.
Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley.Subscribers can sign up to our weekly Inside Politics newsletter here.