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Buried in this week’s aged care reforms was an idea that once cost two ministers their jobs

Politics tamfitronics

The late Australian playwright Alex Buzo liked to celebrate the art of tautology.

For a period from the late 1970s onwards, he ran an event known as Australian Indoor Tautology Pennant, which celebrated gems uttered by public figures such as, “I don’t want to sound incredulous but I just can’t believe it.”

Rex Mossop, the (also) late Sydney rugby league caller, was a regular winner, and was often credited with popularising a phrase first used by American baseballer Yogi Berra that something was “deja vu all over again”.

For those with long political memories, there has been a bit of deja vu all over again in federal politics this week.

That’s been particularly true on the subject of aged care policy, but also on the question of the relationship between government and the Reserve Bank.

Keeping partial aged care deposits with a ‘deja vu’ vibe

On aged care policy, spare a thought for Judi Moylan and Warwick Smith this weekend.

They were two Howard government ministers given the task in 1997 of addressing a desperate capital shortage in nursing homes which had seen the accommodation standards in such places reach appalling and dilapidated levels.

Moylan and Smith, between them, established the aged care legislative framework which still largely exists today and has allowed a significant improvement in standards in the sector.

But the sector has still remained short of the capital it needs to provide enough beds to serve a growing market as we age, as well as day-to-day running costs.

Those changes ended up costing Moylan her ministerial job and Smith his marginal Tasmanian seat.

That was largely because they were trying to put in place a system of “accommodation bonds”or effectively capital contributions, from nursing home residents who could afford it to provide a source of capital funds and incentives for “nursing homes to invest in upgrading facilities”.

The plan was that aged care providers would retain the bond money while a resident was occupying a bed. The money would earn interest that could be used by the provider to build their capital stock.

Providers could also draw down part of the bond each year for up to five years with the balance returned to the resident or their estate on departure.

The idea was met with absolute outrage in the community because of the prospect of the elderly being forced to sell their family homes to pay the bond.

An eventual compromise meant the bond could be paid on a monthly basis, rather than as an up-front lump sum.

And the idea that the capital injection could be plundered was also abandoned.

In announcing aged care reforms this week, the government has conceded that the sector is on its knees.

But lost in the swathe of announced changes is one with a definite “deja vu all over again” vibe.

That is that aged care providers will not only be able to continue to retain the interest earnings on what are now known as “refundable accommodation deposits”or “RADs”but also to draw down 2 per cent of that deposit each year, for up to five years. (Under the current system, the full deposit is repaid).

Already, aged care homes in Sydney and Melbourne are setting RADs at $1 million or even more. That means in the (frankly unusual) case of people who are in residence for five years, the aged care facility may withhold $100,000 of that deposit when the resident leaves.

Recession repeat is haunting the government

There has also been quite a lot of “deja vu all over again” when it comes to monetary policy and the Reserve Bank.

Treasurer Jim Chalmers was outraged this week when the Coalition abandoned support for changes to the Reserve Bank board structure — an issue of virtually no interest to the wider Australia public — but which the Coalition used to suggest a sinister Labor plot to stack the board with cronies.

Since no-one has really been clear on what this issue is actually about: it concerns the proposal coming from an RBA review that there should be a separate bank board to solely consider monetary policy — interest rates — in addition to the main board.

Whether or not this is a necessary or even good idea is a subject that has been hotly debated by policy nerds for some time.

But the immediate issue at play has been who, from the existing board, would move to the monetary policy board.

Let’s cut to the basics here: the changes effectively mean you need twice as many board members across the two boards. The review’s recommendation was that the monetary policy board should include a heavy weighting of policy expertise and specialisation.

Since its establishment in the early 1960s, the RBA board has comprised a much more generalist group of eminent Australians, primarily from business and the union movement, as well as academic economists.

So there’s a bit of “awks” involved here about existing board members who might feel they should be on the new board, or shouldn’t be on the new board, based on their expertise, or think that they should be on the new board in the interests of ensuring some continuity of views. And of course the whole purpose of the change was to bring in some new expertise anyway.

Chalmers made concessions to Shadow Treasurer Angus Taylor about who would or could join the new board from the existing board, concessions designed to accommodate these various delicate positions.

But Taylor was publicly having none of it and suggested a Labor conspiracy to undermine the independence of the Bank.

Linking this up with the suggestion that Chalmers is “at war” with the RBA because he observed high interest rates were “smashing the economy” means a very obscure issue has become one of apparent great principle.

The deja vu bit comes from those who remember the second half of the 1980s onwards when the Coalition first accused the Reserve of being in cahoots with Labor by avoiding interest-rate rises — which would clash with State elections in 1988 — and then by helping Labor to win the 1990 federal election by cutting rates too early.

Of course, as it turned out, the reality was the Bank had lifted rates too high, and kept them there for too long. When it started cutting them in 1990, it was too late and we had “the recession we had to have”. It was a classic case of the lag of monetary policy leading to too slow a response.

A repeat of that experience is now keeping the government awake at night after months of barely visible economic growth and a slump in consumption.

Whatever the politics of the relationship between the government and the RBA, they are desperately hoping that this will not be a case of “deja vu all over again”.

Laura Tingle is 7.30’s chief political correspondent.

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