Why Chalmers wanted an outsider at the RBA, and overlooked an insider

Oxford-educated Hauser joined the Bank of England in 1992 and spent 2004 to 2006 at the International Monetary Fund in Washington.

At the Bank of England, Hauser gained experience in macroeconomics, financial markets and balance sheet management, including during its £895 billion ($1.7 trillion) bond buying program in the pandemic.

The 53-year-old has been heavily involved in the bank’s quantitative tightening – selling government bonds back to the market – which could prove useful as the RBA considers how to shrink its $530 billion balance sheet.

Hauser was also in the thick of the bond market revolt against the UK government’s disastrous mini budget under conservative then prime minister Liz Truss and then chancellor Kwasi Kwarteng last year.

The unfunded tax cuts and projected budget deficit blowout triggered what Hauser said publicly at the time was a “full-scale liquidation event” and “completely out of control”.

He said pension fund managers were “shouting on the phone to us”, prompting the bank to set up an emergency £19 billion bond purchase program to prop up their solvency.

Earlier in his career, he was head of the Bank of England’s quarterly inflation report between 2006 and 2009, a period that included the global financial crisis.

Importantly, his experience will complement Bullock who was less directly exposed to macroeconomics and financial markets as assistant governor for the decade before her rise to deputy governor in April 2022 and governor in September this year.

Loss of experience

The RBA has lost decades of experience in macroeconomics and financial markets following the departure of former governor Philip Lowe, former deputy governor Guy Debelle and former chief economist Luci Ellis to Westpac in the past 20 months.

Hauser is currently one of 21 executive directors at the Bank of England, below the rank of governor Andrew Bailey and the four deputy governors.

While he is in the third-rung of seniority, the Bank of England is a larger and more influential central bank than the RBA. It oversees both monetary policy and commercial banking regulation similar to the RBA and the Australian Prudential Regulation Authority.

Hauser has management experience leading 275 staff, which will be important as Bullock embarks on cultural change at the RBA.

Treasury Secretary Steven Kennedy spoke to governor Bailey about Hauser and was impressed enough to give Chalmers the green light to recruit him.

Hauser, who has relatives in Australia, spoke to Chalmers at least three times during the interview process, including a trip to Sydney in September to meet the treasurer and separately meet with Bullock.

He impressed Chalmers with his detailed understanding of the 51 recommendations in the RBA review.

Bullock said on Monday that Hauser “has great experience and will bring a welcome external perspective”.

Like Bullock, Hauser has a master’s degree from the London School of Economics.

Hauser was chosen from four candidates shortlisted for the deputy role: assistant governor Chris Kent and three external candidates.

Kent can be considered unlucky not to rise to deputy, or even governor.

He has long been earmarked as a potential future governor, after serving more than 11 years in the two most influential assistant governor positions in charge of financial markets and economics.

Like Lowe and Debelle, Kent also completed a PhD at the prestigious Massachusetts Institute of Technology.

Kent was in the wrong spot at the wrong time during a period of change imposed on the RBA by the government.

Bullock edged him out for deputy governor under treasurer Josh Frydenberg, who along with Lowe was keen on a female deputy.

Now, the RBA review and the appointment of insider Bullock as governor convinced Chalmers to tap an outsider to be the deputy.

A personnel risk for the RBA is that Kent considers other career options.

The Bank of England is currently searching for a new deputy governor for markets and banking.

Hauser, once he has his visa sorted, will be relocating to Australia early next year on a five-year appointment.

Bullock is due to appoint an outsider to the new position of chief operating officer recommended by the review and also an assistant governor (economic) to succeed Ellis. Acting assistant governor Marion Kohler is considered the frontrunner.