Aged Care and the Reserve Bank
aged care policy and the relationship between the government and the Reserve Bank.
Deja Vu in Aged Care Policy
The government's recent aged care reforms have sparked memories of the Howard government's attempts to address the sector's capital shortage in 1997. Back then, Judi Moylan and Warwick Smith introduced "accommodation bonds" – essentially capital contributions from residents – to incentivize investment in facilities. However, the idea faced fierce public backlash and ultimately cost Moylan her ministerial position and Smith his seat.
Fast forward to 2023, and the government is once again proposing a similar scheme. Aged care providers will be able to retain interest earnings on "refundable accommodation deposits" (RADs) and even draw down 2% of the deposit annually for five years. This has raised concerns about the potential for financial burden on elderly residents, particularly those with limited means.
Deja Vu with the Reserve Bank
The government's proposed changes to the Reserve Bank board structure have also triggered a sense of déjà vu. The Coalition's opposition to the changes, despite their minimal public interest, echoes their accusations of Labor "stacking" the board in the late 1980s. Back then, the Coalition accused the Reserve Bank of colluding with Labor to manipulate interest rates for political gain.
The current debate centers around the creation of a separate monetary policy board within the RBA. This board would focus solely on interest rates, with a heavier emphasis on policy expertise. While the necessity and effectiveness of this change are debated, the immediate issue revolves around the composition of the new board.
The government's concessions to accommodate existing board members' positions have been met with accusations of a Labor conspiracy to undermine the Bank's independence. This echoes the Coalition's accusations from the 1980s, further fueling the sense of déjà vu.
Deja Vu and the Risk of Repetition
The current situation with aged care and the Reserve Bank carries the risk of repeating past mistakes. The government's proposed RAD scheme could potentially burden vulnerable residents, while the political wrangling over the Reserve Bank could hinder its ability to effectively manage the economy. As the government grapples with these issues, it must learn from the past and avoid falling into the trap of déjà vu all over again.