Transcript of Question & Answer Session The Ghost of Christmas Yet to Come
Andrew Hauser
Deputy Governor
The Australian Business Economists’ Annual Dinner
Sydney –
- Speech
- Speech Audio 52.5MB
- Q&A Audio 32.2MB
Speaker
Normally we go straight to the floor but, Andrew, youre a bit of a rock star. When we published that you were going to speak tonight, I received several texts from several economists, really excited that you were going to talk. And so I thought instead of going straight to the floor, that Id just start off with some light questions. And then the microphone on the right will be for media, and the microphone on the left will be for nonMedia. We will try to prioritise some of the nonmedia questions first. But I thought Id just start off with the fact that you started in February. So youre almost coming up to your one-year anniversary. Youre enjoying the sunshine. You get eight hours of sunshine in Australia on average, versus the frost in London. But what have been some of your highs and lows since youve started, and they might be work highs and lows, or they might be personal highs and lows, whatever you want to throw in?
Andrew Hauser
Some people in the audience are laughing already. I dont know why they think this is going to be a humorous response. Let me start with a serious point, because it is a serious point. It is a huge privilege to be here. Its actually very rare. I think someone should write a paper actually. How many foreigners are asked to help set monetary policy in other countries. Its small. Obviously I come from a country in the UK, Mark Carney as Governor and that was a big event there. Im obviously not the boss in Australia, but nonetheless its a small number of people that are asked to come and do that and I think you can only be very humble, genuinely I mean this, about the responsibility that that, sort of, gives you. I mean, its exciting and great and stimulating as an economist, as a person, but it is very, very important, I think, you know, that you show clearly and actually believe that its important to repay that trust, because policy - perhaps all people always say, central banks always say its unusually uncertain, its unusually challenging, and perhaps I dont know if now is more or less challenging than other times. But nonetheless it is a challenging period, to be setting policy. And its very, very important that we do the best job we can. And, you know, Im glad to be here doing that. But also, you know, I recognise the importance of recognising that. In terms of, sort of, highs and lows, I know a couple of lows, but lets start with the RBA itself. Unbelievably impressive place. Im sure theres plenty of ex-RBA staff in this room, in fact, I find almost everyone that wrote, you know, notes on the Australian economy has something to do with the RBA so the people are outstanding. Obviously, and I made this point, and I assumed Ill be asked, you know, what the hell have we got to learn from you, coming from the UK with double digit inflation and, you know, one cries on this shambles, is a word thats often used about the UK economy and its got some truth to it. I think actually what is interesting about coming from the UK to Australia. Australias, you know, had the - just an unbelievably strong run of macroeconomic success for so long, that actually, you know, maybe one of the things I could bring is an understanding of what - how to think about, when things dont always go quite right. UK has unfortunately had a great deal of experience of that. But the raw material at the RBA is outstanding. You know, sometimes we need to make sure that the sum of the parts is bigger than the - whatever the - you know, the individual contributions culturally and so on and so forth. Theres some important work to be done there. And its great to be part of that. And in terms of the economy itself, look, Im a bit of an economic nerd. You can probably tell wading through the last 20 minutes, but I kind of - you know, the opportunity to get to know a new economy and a new region. I mean, you come from a services dominated country off the edge of Europe to an economy fundamentally different in nature and shape. We have a fantastic liaison program or picture of them, of one of our people up there at the beginning. And Ive been right around the country already and plan to do a great deal more of that. Listening to economy, listening to firms, listening to people in the economy, because you really need to do that to set good monetary policy. I think you cant just sit there with a bunch of slide rules. Its been great to get to know people in the financial markets. I want to do more of that next year as well. Ive had a robust introduction to public life. Thats why he was laughing there, I think, probably. And look, in a sense I come back to my first point, monetary policy matters. Right. Its a big deal for a society to delegate such an important task to a group of unelected officials, let alone people from overseas. And I think its really important to believe - its important as a quid pro quo to get out and explain and to use, you know, straight language, to be honest and direct with people, and to value actually the exchange of views, even if theyre provocative and difficult and challenging. I mean, you know, its not always going to be polite. People are sometimes going to have strong views. Thats because it matters. And I think, you know, that element of being in public life, maybe its a bit of an awakening, but its not unexpected. The UK is a pretty robust place as well. So Ive enjoyed taking the rough with the smooth in that respect. You mentioned the person, I mean, I was here for six months on my own before my wife came out for me because my children was just finishing a school before he went to university. So thats been exciting on a massive - I mean, Sydney was one of my list of places to live and, you know, its one of the great cities, perhaps one of the greatest cities in the world and its a privilege of living here is just fantastic. So getting to know the history of it and enjoying everything here has been brilliant. Sorry, thats quite a serious answer to a light-hearted question. But occasionally - I just want to make this point. Im in meetings. At the end of it someone will lean across to me and say, it was all great, Andrew, but what are you doing here? And Ive always wondered why people ask that question because theres no - my answer would be, why would I not be here? You know, personal, professional development. The opportunity to contribute to the economy here, the opportunity to understand and learn about the place and have a fantastic personal experience. Its all upside for me and I hope that I can repay that a little bit.
Speaker
Thank you. Thank you for focusing on humility as well earlier on. And I really liked how you focused on the architecture of this building to enjoy the history. I thought that was really interesting. And then also talking about the impact of trade tariffs.
Andrew Hauser
Im going to give a bit of a plug, sorry to be nerdy, but the NSW Library has an unbelievable bit on the website, Im nicking that there, Im probably in trouble for copyright reasons, but theyve overlaid all the old maps and photos of Sydney onto a kind of GPS grid. And you can look at any particular bit of Sydney over time by pulling this little lever up and down.
Speaker
Wow.
Andrew Hauser
Unbelievable amount of data work that must have gone into that, maybe macro bombers involved. There you go. Youve got your name.
Speaker
Yeah, I was thinking when you said you needed more work on presentation.
Andrew Hauser
Other data providers are available.
Speaker
Macro bond is quite good on that front. Before I go to the questions though, what are your plans for Christmas? Have you got any plans for Christmas?
Andrew Hauser
Well, look, I said that my family was on the other side of the world and my wife has joined me now and my sons coming out for Christmas. So I may be the only bloke on a beach in a wool suit with one of those knotted handkerchiefs on my head. If I am, take pity on me. Im still learning the cultural norms but looking forward to Christmas here.
Speaker
Yeah. Fantastic. Okay. Look, theres a line there. There you go.
Andrew Hauser
Oh my goodness me.
Speaker
All right. I cannot see who that is.
Andrew Hauser
Some of the scariest minds in economics here.
Speaker
But if you can announce your name and affiliation, please, and then well go to the left.
James Bond
Im James Bond. Its a true but horrible story. Im not from MI6. I am from Citibank. You talked a lot about tariffs but what about subsidies? I seem to remember when I was studying economics, subsidies arent as bad as tariffs but theyre still pretty bad. Were paying a lot of subsidies in Australia to manufacturing, are these a good idea and will they have an impact on inflation one way or the other?
Andrew Hauser
If this is about maybe Australia and so forth, I mean, Im not sure Ive got a great deal of value added to make on that point. Clearly, there are areas in any economy where you could imagine a world in which either financial markets were unable to assess the risks involved, with a potentially highly innovative technology, that you might well want to say, well look do you know what, theres a bridge to driving greater innovation and growth. We think theres a case for getting involved. There obviously can also be cases where promoting comparative advantage makes a great deal of sense. I mean, you know, theres obviously been a trend over time towards greater national policies of economic support, but Im not sure Im going to make specific comments about the Australian approach. Thats a political matter.
Speaker
Paul.
Paul Bloxham
Thank you. Paul Bloxham, HSBC. Thanks for a great speech. I really enjoyed it. I think -
Andrew Hauser
Half of it was from you actually. I was playing back your - there you go.
Paul Bloxham
Thank you very much.
Andrew Hauser
Is it bonus round now or is it later?
Paul Bloxham
So I really enjoyed that - the way you took the problem and looked at the - and gave us a lot of different views on how it would fit together, and obviously the great uncertainty thats going to come about if there are tariff announcements. And so I want to game out a very brief story, which is on the 20th of January we get a US President, a new US President. And possibly he will deliver literally what he says he will deliver. And on that day youll get potentially large changes in trade policy. So your meeting, the next one is the 17th and 18th of February. And youll have a - possibly a very large shift in trade policy thats happened. But really no hard information about what it means. You wont have any data points. All youll have is your scenario-based, model-based approach to what you do with your sets of forecasts. And you have to focus on those forecasts for setting policy. And I just wonder if it literally is the case that what is delivered is whats said is going to be delivered, whether thats going to make you more inclined to do less.
Andrew Hauser
Wow. Thats - I mean, its a good question. I mean, one element of your story that I probably want to ask you to fill in, if you still have the microphone. You know, whats happening to financial markets because - Im going to filibuster a bit while I think about the rest of the answer there. So its been striking, hasnt it, that financial markets - I think - well, who knows - well, it will be interesting, your view on the hypothesis about what the Mr Market or Ms Market, I should say, a Mr and Ms Market, you know, has actually concluded about this package because on the face of it, its a very optimistic story that the markets are telling at the moment about what the next couple of years look like, including for companies that have China right through their supply chain, including for interest rates, including for credit policy, including for equities. So its interesting that maybe - Im going to guess youre part of those markets, Paul, to be honest. You know, maybe the market knows more than the commentary out about what is likely to come. Maybe there is a huge amount of innovation and growth to be - and if you talk to a lot of - youll know if you talk to a lot of companies, they are guardedly optimistic about the next period of time. So, you know, in part, one thing Im assuming in your story, if you believe - if you buy my story about what financial markets are currently assuming, is thered be a sharp, repricing in financial markets, is that right, in your scenario?
Paul Bloxham
I love that youve swung my question back to me.
Andrew Hauser
Very clever. I didnt get one out today, Paul.
Paul Bloxham
Its the first time Ive had that at one point. And I think youre right, but I guess the question is, you know, the market has responded in the short run but, you know, weve been through this before, where markets can move in certain ways. The markets were pricing the European financial crisis before it, as though it wasnt going to happen. So the key question is on the event, if you get the event, and you havent got - youve got a market response clearly, but you havent got clarity about whats going to happen over the medium term, how do you think about your forecasting framework? Youve set it out. I mean, youve set out - what the sorts of things you do, but then how do you factor it in if you dont know the inflation story? Because youve got two-sided risks around it.
Andrew Hauser
So I was at the Bank of England after the Brexit vote, and those of you who are following it will know that the Brexit vote, the outcome was a surprise. It perhaps was not quite a perfect analogy for your description of immediate, immiserating policies, or that you could debate that. And the very first thought, of course, in that situation for a central bank, and let me assume financial markets are in free fall because I think in your scenario, on the assumption they hadnt been announcing these policy change in advance, they would be. The very first thought is financial stability actually, rather than monetary stability. The first thing to do will be to ensure theres sufficient liquidity in the markets of everyone thats involved here, to ensure that it is clear to people that were focused on our stability mandate. In the UK, shortly following the Brexit vote, the central bank did ease policy a little bit. I mean, it was already quite easy at the time, but it did ease policy a bit. But what I would say, and what was quite interesting about that is I think peoples assumptions about the balance between supply and demand of Brexit evolve very, very dramatically over that early period. And had we jumped to a premature conclusion about the implications of it before we worked through the economics we would have made a bad policy error. So I think you have to be focused on the instability implications of it straight away. You have to recognise that therell be uncertainty, and uncertainty itself, of course, has a substantial negative macroeconomic impact. And then you have to do the best job you can, in terms of understanding its implications for interest rates. Thats only a beta minus answer to your alpha question, but well done, and well take that one away. Thank you.
Speaker
Thank you, Paul. I might actually go over to James Glynn, because he has been waiting patiently and Ill come back to you.
James Glynn
Thank you, Andrew. James Glynn from the Wall Street Journal.
Andrew Hauser
Thank you.
James Glynn
Yesterday, the bank gave us a substantially different statement than weve been used to for - over the year. Im wondering can you tell us, does the RBA now have an explicit easing bias? And does the RBA Board have to wait until it sees the whites of the eyes of two and a half percent in the target ban before it will cut?
Andrew Hauser
So Id dispute slightly that it was a dramatically different statement and heres why. We, and Im pretty sure pretty much everyone in this room, have been expecting activity to slow. We have been expecting inflationary pressures more generally to fall back, and indeed that is part of the adjustment process that we needed to see in order to ensure that we were confident, and that was a turn sufficiently confident that inflation will persistently be moving back towards a target. Now, weve seen that data progressively over time, and so even if there had been no news in the latest set of data, we would still have around this period been starting to talk about getting more confident in our projection. And I remember, obviously, I remind people in the room that the projection was for trim mean inflation, only to come very gradually back to the midpoint of the target over quite an extended period. So even relatively small uncertainties about the likely outcome of that could cause the, you know, terminal data at which we hit that target to move, you know, to a place where, as I think the minutes have said previously, the committee had a pretty low tolerance for. So, you know, that sensitivity of the projection to date was always quite large, and we were always expecting to get information in that would give us greater or lesser confidence about that, and indeed weve been getting that. So I cant prove to you that we would have written, you know, something similiar to this in the absence of the most recent data, but I would suggest to you that thats what we would have been doing. Obviously in the most recent period weve had the national accounts, and any of you that have crunched through the farm - the farm and the nonfarm split today will see that there is a bit more news actually, in that split - from that split about, you know, probably underlying activity than perhaps we previously thought. Weve had some weaker wage data at the margin. Rents and house price inflation as well have come in just a little bit weaker, although inflation was overall in target. And so as we - and I can only quote the statement in front of me because I knew someone would be asking this, the Board is gaining some confidence that inflationary pressures are declining in line with those forecast but risks remain. You know, and the biggest risk, of course, and again Im only saying what the statement says, underlying inflation as it is today remains too high. And so I think - and actually I think, you know, in some sense, and again people in the room so Im only telling you what you know, the fact that this was - as I think Michele said yesterday, an evolution of our position. You saw that in the way the markets reacted as well. I think, you know, February we went from what, 50/50 to two thirds, one third or something. Id call that an evolutionary adjustment. Theres a lot of data left to come through the pipe between now and February, and those data need to continue to come in, in line with our forecast, before the time we get to the February meeting. So, look, I dont think it was - it wasnt intended to be, and I think Michele underscored very clearly at the press conference that this was a deliberate set of decisions and communication decisions made by the Board, building on what we probably would have expected to be saying anyway, and recognising that the margin, some of the data have been a bit weaker.
James Glynn
And just in terms of the whites of the eyes?
Andrew Hauser
Say again.
James Glynn
Do you have to get close to two and a half before you start cutting? Or is there scope to do it significantly earlier than that?
Andrew Hauser
Well, remember that what we were trying to do was target the outlook for inflation and our forecast, and I think most of the people in the room, is for inflation only to come very gradually back to target. And its that very gradual path that I think is part of the challenge with setting policy. Youre not targeting inflation today, youre targeting inflation a couple of years out. And thats, you know, to use a phrase, bloody difficult. And so youre forming views about that outlook the whole time. Is there a trigger level for the current level of inflation that would give us confidence that that outlook for inflation, you know, is sufficiently strong to move policy? No, I dont think there is a single trigger figure because were trying to form a view about the whole economy, inflationary pressures as a whole, actual inflation as part of that story but its only part of that story.
James Glynn
Thank you. And Merry Christmas too.
Andrew Hauser
Thank you.
Speaker
Over to Ben.
Ben Jarman
Ben Jarman from JP Morgan. Thank you very much for your speech. The general thrust seems to be that, you know, all the details will matter with respect to trade policy. You know, youve got growth outcomes, inflation outcomes, what happens with exchange rates. So in that context when youre facing potential tariff shocks and trade shocks, is there an even stronger argument for monetary policy and fiscal policy to be, kind of, closely coordinated domestically here in Australia?
Andrew Hauser
So years ago, I think I said this to John Kehoe actually. Mark Carney, the other foreigner in my life said to me, but it was sometime ago said, hows it staying in your lane? That was how we talked. No first names around there. And I do think its quite important actually. It goes back to the point I made in answer to your question, the central bankers have been given an enormous responsibility. You know, not elected by the public - cant be elected out by the public. Were given a mandate to deliver. And woe betide a central banker that starts to decide that he or she has, you know, nailed that. And, you know, has been mandated, which they have not been, to do policy other than the policy theyve been asked to do. And I am quite often struck when people occasionally say, it wouldnt be good if you were getting fiscal policy or something. I think, do you really think that? Do you really think that, you know, if we were to, you know, be given completely free hand, technocratic hand to set policy, fiscal policy, whatever we wanted it to be, that that would be a sensible structure? And I am personally, you know, doubtful of that. Now, an implication of that is that fiscal policy and monetary policy will be made in knowledge of each other but separately. And thats the model we have. I am a believer in it, actually Im sure that you can write models down where, you know, some platonic philosopher king, who had only the best interests of the future generations of society, set perfect settings of monetary and perfect settings of financial fiscal policy. And I dont need to tell you thats not the world we actually live in. And I think its probably important that when it comes to setting fiscal policy, which is about winners and losers, distributional outcomes, that the people that set that policy are subject to, you know, public scrutiny. And I think a consequence of that is, is that we speak a lot, we communicate a lot, we have the Treasury Secretary on our Board, and obviously, you know, people speak - the Treasury and the RBA speak a great deal. But in the end of the day the people responsible for those two sets of policies are separate. And Im not sure the allegedly bad outcomes from that model are quite as bad as people sometimes say. But maybe Im wrong about that.
Ben Jarman
Thank you.
Speaker
Tapas.
Tapas Strickland
Thank you. Tapas Strickland from the National Australia Bank. I wanted to bring us back to the Ghost of Christmas present.
Andrew Hauser
Youre not going to be asking about your survey, are you? Other business surveys are also available.
Tapas Strickland
My Google Gemini AI chatbot helped me recall what Christmas carol The Ghost of Christmas present does. And the Ghost of Christmas present also reveals the symbolic figures of ignorance and want. And I was just wondering, yesterday the RBA Board Statement mentioned how they would becoming incrementally more confident on inflation data by incoming consumption from the GDP figures. But less clear from the statement was whether they were becoming more confident on the potential of productivity to hamper or not hamper the sustained return of inflation to target, specifically firms and workers didnt realise they were going into a lower productivity environment. So I was just wondering whether you could give us a little bit more updated thoughts on feelings about productivity and how thats feeling into the confidence of inflation returning to target?
Andrew Hauser
Well, I mean, as Michele often says, were not productivity experts. We have a commission for that. As you know, the RBA projection, I suspect yours too, assumes some pick up in productivity over the forecast period and thats important as part of the story of bringing James question earlier, bringing inflation back to target. And if that pick up doesnt occur then other things in the economy would have to adjust, which might include inflation or might include wages or something else. And wed have to keep a close eye on that. So Im not - I was trying to track back to the beginning of, you had a lot of thoughts in a ChatGPT and the Ghost of - I did catch some of the other points but its a bit hard to hear from the back here. But what was your question about productivity exactly?
Tapas Strickland
My question was: Is the RBA becoming more confident? Because in the RBA Board Statement it was, were becoming more confident about the trajectory for inflation, but that was more based on Q3 consumption and wages.
Andrew Hauser
Yeah. I mean -
Tapas Strickland
Nothing on productivity.
Andrew Hauser
Sorry. Can I reframe your question?
Tapas Strickland
Sure.
Andrew Hauser
Is in our overarching point that were becoming more confident about inflationary pressures, does that include becoming more confident that productivity is going to rebound?
Tapas Strickland
Either productivity rebounding or more confident that firms and households are making adjustment to the potential for productivity not lifting.
Andrew Hauser
I dont think a change in our view about confidence or otherwise on productivity was a key part of our decision in the month. No. I mean, perhaps youd be a bit surprised if it was because, you know, productivity data only come around every now and then. Its interesting. Our Board, as you know, is a slightly broader Board than the Board Im used to in the UK and we have quite a few business people around the table. And they - actually interestingly when we present the latest set of productivity numbers to them, they very often sort of screw their face up and say they dont recognise them. Now, obviously theres a composition point, but they point out that in many of the companies theyre involved with theres a great deal of investment going on in new technology and in ways of using labour more efficiently and so on and so forth. And I think thats quite a common theme actually when we go around in our liaison meetings, that there definitely is investment going on to improve productivity. After all, theres so many new workers in Australia. You know, there must surely be capital provided for these extra workers to work with and over time that should become a more positive story. The data, you know, I mean, theyre pretty - they have been pretty bleak, right, and its not just true in Australia. Its true in my own country of the UK and everywhere practically, except the US. And so looking backwards the out turns have been quite concerning. What we hear on the ground is that it remains more likely than not that the type of pick up were expecting, it needs to come. But if it doesnt come, something else in the economy will have to adjust to bring inflation back to target.
Tapas Strickland
Yeah. Thank you.
Speaker
Andrew, how you going? Because I was going to go to Jo.
Andrew Hauser
Its all right.
Speaker
And then well finish with the right, or is that too much?
Andrew Hauser
Yeah, no, its all right.
Speaker
Thats fine. Well, well take the question from Jo.
Andrew Hauser
Shes always going to ask me a hard question so maybe we should -
Speaker
And it was really good to see Jo on Q&A recently.
Andrew Hauser
Yeah. You know what, excellent. Lets give her a round of applause. At least half the room clapped, Jo, so there you go.
Jo
Im just trying to add a bit of diversity to the people asking questions.
Andrew Hauser
I know.
Jo
So I would encourage the females in the room to stand up. Thanks for your great speech. I wanted to circle back actually on the shock that could be coming from China. And, as you said, we dont know what the detail of the tariff policy looks like yet but were incredibly exposed. And you made the point, clearly correctly, that when we look historically Australia as a low cost producer of iron ore in particular, but actually broadly of commodities, we tend to be able to shit whatever we can dig out of the ground. So the volume impact is generally quite limited. And we saw that with the coal ban in China a few years ago. As economists we often think about GDP expenditure, like GDPE, right, but in a small open economy, very commodity based, the income side is really important. And whilst we might be able to ship lots of volume, we often take a hit through commodity prices and the terms of trade. And the starting point of that potential shock coming from China is one where a broad-based private sector income recession in Australia, mining profits are contracting annually, nonmining profits are contracting, household disposable income was disappointing and the terms of trade are falling. So are you more worried about the income side and how are you thinking about that as you factor in the scenarios that you talked about?
Andrew Hauser
I think its a good point. To be honest I think youve answered your own question. Youre obviously a pro. Its interesting. The iron ore price has behaved interestingly, hasnt it? Maybe if you get pulled back up and tell us how your forecast is doing. Do you have to put actual money on your forecast or just write them down? I dont know. But, I mean, the iron ore price has not fallen as much as, you know, some of the more doom laden scenarios might have suggested. Is that, again, part of this broader optimistic story of financial markets and its all going to go south, or is it telling you something that people know? Its interesting, right, looking at the market for steel, as I had to talk about things I had to learn about, and how that market is evolving. Its clearly, you know, the use of steel in construction and home building and so forth in China. You know, peaked some time ago, right. I dont need to tell you this. Im probably telling you about what Ive read in your own pieces. But the diversification in the use of steel and the innovation in use of steel is an interesting story and its actually gathering a pace. And my understanding is that some of the forecasts for the, sort of, peak steel or whatever and this sharp fallback in the outlook for steel production have been somewhat falsified on the upside. So we have to be, you know, probably humble about the way we forecast that. Look, I cant say very much more than the fact that the kind of scenario you describe is clearly a downside risk. It clearly is. And I think one of the interesting things about that BIS chart, one of the reasons why I showed it is, clearly there is a degree of concentration risk in what you might call Australias current business model. And, you know, its been enormously successful. And, you know, a bit like you might - they say in Apple, why are you focusing on the iPhone? I mean, you know, well, wouldnt you too, if you had such a successful product. But there are challenges there, in terms of differentiation of diversification in the years ahead. Im not sure Ive really answered your good question, Jo, but let me reflect on that. Thanks.
Jo
Thanks for your comments. Appreciate it.
Andrew Hauser
Thank you.
Speaker
Thanks. Well finish with the media questions. Because I have stretched the envelope a lot already, if we could just make the questions quite specific, please. Yeah. So well go over to the first one.
Sophia Rodrigues
Yeah. Sophia Rodrigues from Central Bank Intel. At a recent Q&A - you can hear me?
Andrew Hauser
Yes. Its a bit echoey here. Maybe its just me but anyway, you keep going, Sophia, and Ill -
Sophia Rodrigues
Okay. At a recent Q&A event, Governor, I think leaked out a little secret and I dont think people in the - everyone in the room heard that. You are a glass half empty person. So Im very interested to know the insights. What is a glass half empty person thinking, especially because Bullock said that she believes that there are better times ahead. So do you think there are not so better times ahead And if you could describe that.
Andrew Hauser
Yeah. All right. Let me take the other two questions then I can pick and choose which one I answer so.
Speaker
Yeah, perfect.
Peter Hannam
Peter Hannam from the Guardian.
Andrew Hauser
Hey Pete.
Peter Hannam
And I was wondering whether - if Dickens had named any central banker, he might have had a name like Hauser or Wauser. Anyway, thats not my question.
Andrew Hauser
Yeah, thats true. He didnt like debt though, did he? He was very, very -
Peter Hannam
No, thats right.
Andrew Hauser
Not keen on bankers. Anyone in the room.
Peter Hannam
Yeah. So, look, my question is coming from the banking with a specialist monetary policy board. If one had been in place in this past year, do you think there would have been a different stance? For instance, you know, weve had a year with no interest rate change. Would a monetary policy board, say it lifted, be more active, such as in New Zealand and cut and - instead of stasis?
Andrew Hauser
Got it.
Peter Hannam
Thank you.
Andrew Hauser
Last but not least.
Question from the floor
Okay. So my question has two parts, Deputy Governor. So, firstly -
Speaker
Succinct.
Question from the floor
Ill be succinct, I promise.
Andrew Hauser
You guys dont understand the game theory of this. If you offer two questions, were going to go for the easy one, right. You should - you should -
Question from the floor
Dont worry. Theyre fairly related but Ill give it a shot. So, firstly, in your speech you mentioned the impact of the upcoming - well, like the trade wars on the Australian economy is ambiguous. So how worried are you about this uncertainty and ambiguity? And, you know, with that in mind it seems, you know, the current Reserve Bank forecast for steadily falling inflation over the next year or two, doesnt factor in these upcoming US tariffs and countries retaliating. So is there a chance these forecasts might be a little bit too optimistic as they stand?
Andrew Hauser
Okay. All right. Very briefly, and I dont know - yes. So its true that Michele has a cup that I think Phil gave her which is glass half full. And I thought it would be rather amusing, although she didnt think it was as amusing as I did, to get a cup made which said glass half empty. The two go together in theory, as you say, so its a perfect match. Its funny, central bankers are trained to worry about the left hand tail. Right. Theyre trained to worry about the bad outcomes. And sometimes we do actually have to remind ourselves that monetary policy, unlike financial stability is about hitting the midpoint. Its about making sure we get the balance right. And so if your question is, you know - youre surely not asking me, what are some of the downside worries in the current economy? I mean, I could go on and list them all night. But there are, you know, countervailing upside risks as well. And, you know, we have very lively discussions, not just me and her, but the whole Board about that balance, about that balance of risk. Interesting question, what would the Bank of England MPC have done in the circumstances? My guess is much the same, actually. Years ago, when Mervyn King, I think he said to me, look, you know, the system has got so many checks and balances in it you could probably run it with a set of dogs or something and it would still on average come out with the right answer. Im not sure - that was a cyclical low point of his confidence in the committee or something. All committees have strengths and weaknesses. One of the challenges with the Bank of England, one is obviously theres independent named accountability. And, you know, so everyone feels they need to get out. The world must know my view, and sometimes maybe the answers, although the world doesnt need to know your view, it needs to know what the committee as a whole is thinking. Theres a lot of - because you have a lot of economists in the room, as you all know, you get a lot of technical debates, sometimes which slightly miss the big picture. And so my suspicion is that, do you know what and having sat on the - not as a member of but listened into the motion policy committee discussion in the Bank of England for many years, that it wouldnt have been actually that different. One of the strengths of the Board here is it does bring in people with judgment and knowledge. And to the question about uncertainty, your question actually I havent answered yet. You know, actually whats interesting is the motion policy decision is only about one variable. When you have - see policy, you know, business people, they have 28 decisions to make every meeting. We only have one. And so in some limited sense actually, our decision-making is a bit easier. In other ways its a bit more difficult. I think its a great question actually about is it possible? Let me reframe it slightly, is it possible that the biggest risk from all of this tariff stuff is not whether its good or bad but that nobody knows. And the uncertainty impedes investment and it challenges our decisions about household budgeting and job security and all those things. And its certainly true that one of the biggest risk actions, one of the comments we got on the speech that I didnt probably take on probably when we were doing it in draft, is have you underplayed the fact that what if nobody knows, from day to day, from week to week, for months and months, whats going to happen? I think thats quite a profound point and one that we will have to think about. Im going to stop there.
Speaker
Thank you so much for your generosity. When you said to me, you know, Im happy to do longer on Q&A, you definitely have been incredibly generous. No, weve loved it. So big round of applause for Andrew, and thank you so much.