Divergence between the monetary and fiscal policies in Australia

Comments on Michael Stutchbury “Swan remains a pessimist”, 4/11/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/swan_remains_a_pessimist/

Stutchbury starts with the following:
“AUSTRALIA is leading the Group of 20 nations in lifting interest rates because the Reserve Bank is more optimistic on the economy than Wayne Swan and his Treasury bureaucrats are.
Swan and the Treasury won’t wind back their budget stimulus quicker than scheduled because they are more pessimistic about the economy than the Reserve Bank is.
Reserve Bank governor Glenn Stevens says the risk of a serious economic contraction has passed. The Treasurer and Treasury secretary Ken Henry maintain the economy remains vulnerable to significant setbacks. ”

Bearing in mind the different role in macroeconomic policies Henry and Stevens play, I would tend to agree with the more independent governor Stevens for RBA's estimate of the economy than the much less independent Treasury secretary Henry and its Treasury estimate, even without applying any of my own judgement.

Henry is also at risk of being seen as part of “interest group”, given that the budget estimate was done by Treasury and him. This is beyond the perception that he and the Treasury have possibly become partisan and got too close to the government.