Josh Frydenberg, Australias federal treasurer, has defended the Reserve Bank of Australia against criticisms launched by Paul Keating, a former Labor prime minister, that it isnt doing enough to help amid the COVID-19 economic crisis.
“This was a very nasty, personal, vindictive, unnecessary, misguided attack by Paul Keating,” Frydenberg told ABC News Breakfast on Sept. 24.
“The Reserve Bank has done very well through this crisis. Unlike other crises they didnt have room to move on monetary policy.”
Frydenberg said the Reserve Bank pumped $75 billion worth of liquidity into the banking system to stabilise it and purchased $60 billion worth of government bonds from secondary markets.
Keating, however, wants the Reserve Bank to purchase bonds directly from Treasury. But doing this would “undermine the credibility of the central bank,” according to Warrick McKibben, a former RBA board member.
“This is a recession where its fiscal policy that really needs to take the lead,” Prof. McKibbin told News Corps The Australian.
McKibbon said that it was Keatings policies when he was treasurer in 1991 that caused the last recession.
Frydenbergs remarks come in response to a letter Keating reportedly issued to some media in which he criticised central bank officials for lacking the courage to break with “economic orthodoxy” to help make the governments funding task “much easier and support for the country better.”
“It has to be remembered, these are the high priests of the incremental,” Keating wrote, as reported by the ABC.
“Making absolutely certain that not a Bank toe will be put across the line of central bank orthodoxy.
“Certainly not buying bonds directly from Treasury—wash your mouth out on that one—what would they say about us at the annual Bank for International Settlements meeting in Basel?”
Keating also wrote that the Reserve Bank should fund “mountainous sums” of fiscal policy to help the government through the COVID-19 crisis.
Frydenberg defended his remarks on Keating in the media, suggesting to ABC Radio and Nines Today program that Keatings comments were triggered by the Reserve Bank governors speech about the trade-off between wages and the superannuation guarantee two weeks earlier.
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