Keating’s Banana Republic
Contrary to the comment piece by Neil O’Keefe, Treasurer Paul Keating’s 1986 Banana Republic comment in a radio interview with John Laws was not a calming statement designed to avoid panic in the markets.
It was a foolish panic-stricken reaction to disturbing Balance of Payments (BoP) figures that showed a large increase in Australia’s current account deficit. The comment caused the Australian dollar to immediately plunge by 3 cents. This came on top of a 1 cent fall in the dollar following the actual release of the BoP figures.
The silly off-the-cuff remark required Prime Minister Bob Hawke, who was in Japan at the time, and about to fly to China, to intervene and hose down the situation.
In brief, the facts are as follows:
- The balance of payments figures were released on 13 May 1986 and showed a current account deficit of $1,476 million, an increase of $434 million on the previous month.
- Keating had been predicting for some time that the balance of payments deficit would turn round because of the earlier devaluation of the dollar. He hyped the “J-curve” an image of the graph of an improvement in Australia’s trade performance.
- After the poor current account figures– unbeknown to Hawke – Keating announced that a “Summit”, a special meeting of the Advisory Committee on Prices and Incomes would be convened.
- Acting from Beijing, Hawke pulled Keating into line, placing Acting Prime Minister Bowen in charge of the Advisory Committee and announcing that “all ministers that may have some desire to have an input into the process will do that via Mr Bowen.”
Paul Malone was Political Correspondent of the Canberra Times at this time and travelling with the Press Gallery party covering Mr Hawke’s Japan/China trip.
Contributions to Pearls and Irritations
Your contribution will fund quality independent comment and analysis in Pearls and Irritations
Contribute
