It’s hard to denythat the SG has to some degree becomepoliticised – it got to the Keating 9 percent and then nowhere for a decadeof the Howard Government. So isthere merit in having the SG set by anindependent body such as the ReserveBank, and taking it out of arguablymore partisan hands. So to kick thingsoff I thought I’d ask Nick Gruen, thecatalyst somewhat of that original openletter to Kevin Rudd, to talk about thereactions the economists received totheir proposal. And whether it has anytraction whatsoever in
Canberra to date.
Nicholas Gruen: I started thinkingabout doing this with one thingon my mind, which wasn’t directly thesuper thing initially, but – this was atime when it was clear that what wasgoing on in
America was very serious, it wasn’t just another recession. And thegovernment was still playing footsieswith the question of whether we wouldrun a deficit.So I thought that I would try anddo Kevin Rudd a favour, and try to show that it was very respectable tobasically just regard the deficit, particularlyin the financial circumstancesof the government’s balance sheet, asquite a small matter compared with theenormity of the tasks that would comeupon it.So I then set my mind to the armsof policy that might be used.
And theSG proposal was one of them. I’vetalked about this kind of thing for quitea long time. As you were introducingus, Michael, I thought how ironic itwas that the people who came out andaccused us of short term thinking did sowithin about twenty five minutes of thestatement going public.They focussed on the short termdownsides of the proposal from theirpoint of view, and not the fact that itwas a long term plan very much in thedirection they felt themselves to befighting.
But I must say, I’ve never meta decent idea that hasn’t been rejectedwhen it’s first put forward, with greatconfidence and near unanimity. ButI’m still a bit disappointed that a largegroup of well respected economistswere so easily given the ‘doddering daiquiridrinking’ treatment which is, youcome up with a line to say, ‘this is silly’and then everyone says ‘oh well, I guessit must be’ and they don’t talk about itagain. Michael Bailey: Are there people in
Canberra, Tony, that are sympathetic tothis idea?
Tony Cole: I think there arecertainly bureaucrats who listen to it,but they need some more comfort frompeople outside
Canberra talking aboutit more before they do anything. I’vehad a long term view that having a variablerate of SG was an economic policytoo good to ignore. Monetary policy isactually fairly ineffective – it’s blunt andit’s harsh. Only about a third of householdshave any mortgage debt. Andprobably half of those have insignificantmortgage debt.So when you put interest rates up ordown you have an effect on a very smallslice of the population.