Colin James: Scragging ahead for banking missile dodger

He has been the economy's good Presbyterian, enforcing the golden rule of monetarism. Now he will inject some intellectual weight into National's fragile economic policy-making.

He's been there before - nearly. In 1980, a raw banker standing for National, he got trashed in a by-election by Social Credit's Garry Knapp, who was promoting almost the antithesis of the deregulatory economics Dr Don Brash stood for.

Had Brash won then, or in the general election the next year when he stood again, he, instead of Ruth Richardson, might have carried the radical deregulatory standard in the early 1990s.

Those economics earned him the implacable hatred of Sir Robert Muldoon, National's egregiously interventionist Prime Minister at the time of the byelection. Sir Robert put up the tolls on the Harbour Bridge in the middle of the campaign to sink Brash.

Twenty years on, Brash ran foul of another authoritarian Prime Minister, Helen Clark, when he made a "personal" speech to the Knowledge Wave conference last August urging deregulatory economic policies to get economic growth up to address pressing social concerns. Helen Clark growled, Muldoon-like, that Brash was regurgitating "failed" 1980s policies.

Of course, a Reserve Bank Governor cannot make a "personal" speech at a major conference. He was naive to think he could. He has a lot to learn about politics. It will be, he told his stunned press conference yesterday, "quite a transition".

Brash is used to slings and arrows as the guy who always has interest rates higher than the populace wants. But until now he has always responded in measured tones or through carefully argued speeches that read like economic papers. Being scragged by the neck in the House would be a different experience.

But opponents might find MP Brash a different prospect from Governor Brash. He repeated his Knowledge Wave preoccupations at his press conference yesterday: improving education, reducing welfare dependency, combating crime and abuse and easing the divisiveness of the Treaty of Waitangi process.

He is no dry-as-dust banker. His social policy interests bespeak a pastoral heritage: his father was moderator of the Presbyterian Church and as a young man he was not the right-winger we know now.

Brash's high integrity presumably stems from the same source. Another person jumping from the bank's neutrality to partisanship without a decent interval would arouse suspicions about his recent raising of interest rates in election year. Not with Brash.

But in his case, integrity doesn't equate to straight-laced. In the 1980s, Brash modishly acquired a younger second wife. There is, behind the flinty face, a human.

His record as Governor, though, will be for being a rock - in an economy of swirling tides. Helped by world-leading legislation that he helped to draft, he scoured inflation out of the popular culture, no small feat in a society hooked on heavy government borrowing and spending. But in part, he reaped the benefit of a world which was squeezing out inflation, which meant that our rate came down too.

He miscued badly on the impact of runaway house prices in the mid-1990s and had to stand on the brake hard and long to get the bus back on the road. That cost us an expensive delay in getting the dollar down to a level our exporters could handle.

And, while yesterday he congratulated himself on getting inflation down to an average of 2 per cent during the 1990s, he seldom managed to get it in the lower half of his target band, even when Winston Peters got him more leeway in 1996.

With world inflation on the rise following Alan Greenspan's desperately low interest rates in the United States, Brash's successor will on the face of it, look less benign.

And who might that successor be? My pick would be Dr Arthur Grimes, a brilliant former Reserve Bank chief economist who coaches soccer and cricket and plays rock, jazz and classical music. Grimes has just been appointed to the bank's board.

* ColinJames@synapsis.co.nz