Bernard Hickey: Banking on a fair referee and good judgment calls

Photo / AP

When you read this you'll know whether Nigel Owens had a good game refereeing the Rugby World Cup final.

His calls will have been judged by rugby fans with the benefit of 20/20 hindsight in multiple action replays.

We all hope that when those calls are tight and the details are murky within the depths of the scrums and rucks, he gives the game the benefit of the doubt and doesn't unjustly change the outcome.

He won't want to feel like Craig Joubert after his wrong call in the last minute of Australia's quarter-final victory over Scotland.

In many ways, Reserve Bank Governor Graeme Wheeler has a similar role, making judgment calls, knowing his decisions could affect the economy at the end of the "game" in 18-24 months.

He has no action replays and there is no TMO.

His decisions take up to two years to play out in the bowels of the economy. His role has been described as trying to drive around a corner looking in the rear-view mirror and using a knee and an elbow to steer.

Yet he still has to make those calls and there is growing criticism that those made over the past two years have been poor. The Reserve Bank's job is to keep inflation at 1-3 per cent over the long run and the Governor pledged to Finance Minister Bill English in 2012 to keep it around 2 per cent. But he has missed his target ever since.

Annual Consumer Price Index inflation has been below 2 per cent since the September quarter of 2011 and below 1 per cent since the September quarter last year. The Reserve Bank's own measures of core inflation have been below 2 per cent since March 2011.

Meanwhile, unemployment bottomed out a year ago at 5.5 per cent and has since risen to 5.9 per cent. Economists expect it to rise to more than 6 per cent next year, potentially as high as 7 per cent.

He wasn't responsible for the results in 2012 or 2013, but his decisions last year and the results now are definitely in play.

His choice to hike the Official Cash Rate by 100 basis points to 3.5 per cent between March and July last year was clearly wrong.

Wheeler has blamed the failure of inflation to rise back into the forecast range of 1-3 per cent on the slump in dairy and oil prices and the surprise rise in the New Zealand dollar to 88c. But that currency rise was a direct result of his rate hikes combined with weaker overseas inflation and monetary policy easings by other central banks.

This week, Wheeler made another judgment call to pause his unwinding of last year's rate hikes, at least until December 10. Most expect him to deliver a final cut then.

But why wait? Inflation is very low and even the Governor acknowledged last month that new technology and globalisation seem to be blowing a chilly wind of low and falling prices through the economy.

In essence, he is giving the benefit of his doubts to his fears about inflation, rather than the risks of unemployment rising further and the export sector being hurt further by high interest rates.

Just as Owens has the right to make these calls, Wheeler could have given his benefit of the doubt to the 148,000 unemployed and the farmers recovering after years of a toxic combination of unnaturally high currency and weak commodity prices.

His job is tougher than Owens', but he should have given the benefit of the doubt in the form of a rate cut.