The Trust Deficit by Sam Crosby

Author:Sam Crosby
Language: eng
Format: epub
ISBN: 9780522869026
Publisher: Melbourne University Publishing

Surfing the Financial Tsunami

With the next RBA board meeting scheduled for 7 October, everyone was expecting a big cut to the official interest rate, of half or even three-quarters of a percentage point. The Strategic Priorities and Budget Committee (SPBC) of the Cabinet—consisting of Rudd, Swan, Deputy Prime Minister Julia Gillard and Finance Minister Lindsay Tanner—was scheduled to meet the same afternoon in Brisbane.

Treasury Secretary Ken Henry attended the SPBC meeting in Brisbane to present on the state of the global economy rather than chairing the RBA meeting, leaving it to Treasury senior economist David Gruen to take his place. The meeting documents circulated to Board members before the meeting recommended a cut to the official interest rate of half a per cent. When word of the RBA cutting a full 1 per cent broke, the SPBC attendees were dumbfounded: ‘The room was stunned into silence. My nagging concern that not everyone in the meeting understood the size and scope of our problem was no longer the case’, said Swan.62

The meeting promptly closed and a smaller meeting with Rudd, Henry and Swan was convened next door. Gruen, fresh from the RBA meeting, called in to update the Prime Minister. As the new, smaller meeting opened, the PM’s face became distinctly pale,63 but despite Rudd’s obvious fears, his apprehensions were never projected to the nation. Rudd never deviated from his role as the reliable, competent steward of the nation’s economy in a troubled time.

On 8 October, the Treasurer flew to the United States for some of the most ‘critical meetings of Australia’s economic history’.64 On the trip to the airport one of his aides split his suit pants right down the rear seam: ‘It wasn’t lost on anyone that his arse was falling out of his pants—just as it was in the country we were about to visit.’65

At these meetings the PM and Treasurer could rely on earlier, more comprehensively detailed work that had been commissioned by renowned economist John Edwards following Henry’s disaster planning on the Gladstone flight. Swan explained they

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