• Pete Jonson

RBA Games

Updated: Sep 27

I spent 28 years of my life trying to help the Reserve Bank to lift its game. Seventeen years working at the place, seven of which was as Head of Research, and eleven years writing for The Australian. While at the RBA as Head of Research I was effectively chief economist, reporting to the Governor and deputy Governor.


In my RBA days I often felt as though I were working for Don Quixote, as in the wonderful novel by Miguel de Cervantes. Well, two of them actually, Bob Johnston and Don Sanders. This scenario saw me as the side-kick Sancho Panza, Quixote’s ‘faithful squire, with the hopes of becoming the governor of his own island one day’.

Then after moving to the private sector and a break to recover enthusiasm, PP McGuinness suggested I write about the ‘Reverse Bank’ on the morning of each board meeting, and he provided me with the nom de plume of ‘Henry Thornton’. Now I felt as if I had become Don Quixote, who of course rode around Spain tilting at windmills. Eventually the Don went mad.

Toward the end of my time at the RBA (the latter 1980’s), Bob and I parted company in our contributions to the board. I would argue that the board should raise interest rates further to cool the economy, and board members seemed to agree. Bob, however, said exchange rates were too high, and said that interest rates should be cut.

This week’s wonderful blast from Paul Keating made my heart throb. His theme was about the RBA’s ‘indolence’. In my days writing for the Oz my theme was that the RBA congenitally moved ‘too little, too late’. Too late raising rates meant ‘too far’.

I think that was the era of Bernie Fraser, who was eventually to raise cash interest rates to around 20 per cent. This produced ‘the recession we had to have’ (another Keating jewel), a result that led Ian Macfarlane to later apologise to the populace.

Here is a link to Paul Keating’s criticism in Thursday’s Australian and the subject of his criticism of deputy Governor Guy Debelle. Mr Debelle is of course working in difficult times. Mr Keating says he lacks analysis.

A research project that I am currently working on with Clifford Wymer says cash rates are a poor way to measure monetary policy anyway. This research provides a good framework which I hope may one day catch the eye of central bankers.

The basic argument goes as follows. A combination of low goods and services inflation (from Paul Volcker’s work 40 years ago) and excess money leads to asset inflation. When the big crunch in asset values occurs, possibly very soon now, goods and services inflation will return.


Fiona Prior visits the Archibald Prize 2020. More here.



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This is a new HenryThornton site. The first Henry Thornton website is available at the National Library's Trove.  http://pandora.nla.gov.au/tep/33415