The backstop intervention provided liquidity to haemorrhaging pension funds that had taken risky bets on leveraged so-called liability-driven investments (LDIs) to protect their incomes during the earlier period of near-zero interest rates.
“We hoped that we could do it through means other than the ones we ended up doing, but the ones we ended up having to do was to buy gilts,” Hauser says.
“Ultimately, the intervention was extremely successful. It brought yields down very quickly,” he said. “And although the LDI funds struggled in the three-week period to get their act together, they did so.”
‘Right at the centre’
Former RBA deputy governor Guy Debelle has known Hauser for about 15 years and worked with him on international financial market reforms following scandals in the LIBOR (short-term interbank interest rate) and foreign exchange markets.
“Andrew’s been right at the centre of it,” says Debelle. “He understands economics, financial markets and all the aspects of central banking.”
Hauser says he was happy to receive frank feedback from people working in the financial markets and expects similar interactions in Australia.
“I value that. I don’t mind people shouting on the phone,” Hauser says. “That kind of relationship, a very direct feedback, was crucial to understanding what was going on.”
Hauser, who started at the RBA in February, says his natural inclination is to engage strongly with the world outside the proverbial ivory tower (not his words) of central banks.
It is a necessity imparted to him by the high-profile former Bank of England governor and former Goldman Sachs banker Mark Carney, a Canadian who led the British central bank from 2013 to 2020.
“Mark encouraged us to be challenging about the assumptions that we were making and to reach out to the outside world to understand the structural changes that were going on,” says Hauser.
“You cannot have groupthink at a central bank,” he adds. “You have to challenge yourselves – where could you be wrong?
“You have to embrace diversity in its true sense, which is a range of views. The crazy guy in the room, or the person with a different perspective, should have a voice. Because we’re learning. We’re trying to understand how to navigate a different, more complex world.”
Carney’s tutorage on broader engagement was very different from that of another former governor, Mervyn King, who joined the Bank of England in the same week as Hauser in 1992 and set it on a path to formal independence from the government.
Mervyn King, former governor of the Bank of England. Chris Ratcliffe
Hauser became King’s chief of staff, helping professionalise the bank’s bureaucracy to convince the government to hand over interest rate decision-making powers in 1998.
“The decisions were [previously] made in government and we were paying the price in the UK for that because the lack of independence, we were paying an inflation risk premium,” Hauser says of the higher borrowing costs pre-independence.
“The thing I took from working for him [King] in particular, was you can never afford to take your eye off the ball of your primary purpose, which is inflation.”
How he was lured to the RBA
So how did Hauser end up on the opposite side of the world in a different hemisphere to become Michele Bullock’s deputy?
Chalmers was keen to select an outsider as deputy, to help reform the bank in line with recommendations made during an independent review of the RBA.
The government knew Hauser and his colleague, Sarah Breeden, were in the mix to be promoted to deputy governor at the Bank of England. The government believed both were very well qualified and there would be an unlucky runner-up who would provide a recruitment opportunity for Chalmers.
The first approach to Hauser came via Bullock in a phone call last year. Treasury secretary Steven Kennedy spoke to both Hauser and Breeden separately. Hauser was in Norway for one of their chats.
“The requests which came last year to throw my name into the process was unexpected, but it clicked in all sorts of ways,” Hauser says. “It is a huge privilege.”
Breeden was named the Bank of England deputy governor in August 2023. Before long, Hauser was interviewed on a video call by Chalmers, who “asked very good, appropriately challenging questions”, according to Hauser.
Chalmers was obviously impressed because Hauser flew to Sydney in September to meet the treasurer and also to separately meet Bullock.
Hauser impressed Chalmers with his detailed understanding of the 51 recommendations in the RBA review and his interest in imparting change at the institution. He was eventually chosen from four candidates shortlisted for the deputy role. He beat assistant governor Chris Kent and two other external candidates.
Hauser’s experience in crises appealed to Chalmers, who worked for former treasurer Wayne Swan during the 2008 global financial crisis when the Rudd government unleashed a fiscal stimulus and guaranteed bank deposits.
Hauser’s crisis experience includes the turmoil at UK banks during the global financial crisis, when depositors queued up outside Northern Rock branches. “We actually had a run on a bank in the UK. We had people in the street.”
The BoE secretly made two big emergency loans to Lloyds which acquired the teetering HBOS and the Royal Bank of Scotland.
Hauser was also present for the European sovereign debt crisis from 2009 onwards, Brexit, UK financial market rigging scandals and the Ukraine war that fuelled an energy price shock at the very time the UK had just become highly dependent on Russian gas.
“For better or worse, that experience has been heavily shaped by a whole sequence of crises and shocks,” Hauser says. “It’s not just long experience with central banking, but it’s the experience of being tested as a central banker.”
Experience in Australia
Hauser, 54, is no stranger to Australia. His sister has lived in Sydney for about 20 years. On a trip to this country in 1995, the first AFL game he went to in Melbourne was Carlton’s premiership in the grand final in front of more than 93,000 fans at the MCG.
Mark Carney, former governor of the Bank of England.
He now admits to being torn between following Carlton and the Swans in his new hometown of Sydney. He has a Swans cap on his desk, but suggests he’s hedging each way between the two clubs. Debelle (a Carlton supporter also with a soft spot for the Swans) has taken Hauser to an AFL game in Sydney.
Hauser has two sons aged 18 and 20, who are remaining in the UK to study at university. His wife, Demelza, previously worked at Amnesty International as the Asia-Pacific program director. She is due to settle in Sydney with him in August.
Also spotted on Hauser’s desk when the Financial Review visited on Friday was a “half empty” glass, the opposite of the “half full” glass on Bullock’s desk, which was gifted to her by former governor Philip Lowe when he handed over the reins last year.
“We have a yin and yang,” Hauser jokes.
But Hauser does not appear gloomy or pessimistic. The consistent message from senior RBA colleagues is that he has a “lot of energy” and is an upbeat personality. One observer remarks: “He’s very English, but he’s not pompous.”
Hauser says: “I love the job. It’s the best job. There is so much going on.
“This is a very well-respected central bank,” he says. “But one, too, that is facing into some of these big global challenges in a way that really offers opportunity.
“I have a strong interest in trying to push the envelope on what is central banking, what is modern central banking, and big, really big, and important questions around thought leadership,” he says. “But without wishing to be arrogant, I hope I can help contribute to that in Australia.”
For Hauser, that includes emerging issues on climate change, the energy transition, labour markets, the role of big superannuation funds and banks in financial stability and supply chains in the post-pandemic economy.
Australia outperforming the UK
Hauser says Australia’s economy and institutions are stronger than the UK’s, where the economy and living standards have stagnated since the 2008 crisis.
“I’ve just been to Perth – you can see it,” he says. “The list of things that Australia does better than the UK is long.”
GDP per head is now about 50 per cent higher in Australia than the UK, based on some international measures, he says.
“This is a country that had been very focused on pulling itself upwards,” Hauser says, citing a book he has recently read, Why Australia Prospered: The Shifting Sources of Economic Growth by the late Ian McLean. “The institutions of Australia should be cherished, the flexibility, the resilience, the rule of law.” He admits to being “nerdy”, by reading the Australian Constitution.
Some observers, surprised that Kent was overlooked for Hauser, suggest that the BoE’s track record is worse than the RBA’s. But another local observer who endorses the Hauser appointment says: “That’s the organisation, not the person.”
Hauser studied politics, philosophy and economics at the University of Oxford between 1989 and 1992, before joining the Bank of England. He obtained a master’s degree in economics from the London School of Economics, the same postgraduate degree as Bullock.
At the LSE, he studied under Charlie Bean who later went on to become BoE deputy governor. Like Bullock, he also studied under former BoE board member Charles Goodhart. Ironically, Goodhart, a British citizen, was sounded out in the mid-1970s for the RBA governor role by then treasurer Jim Cairns shortly before he was sacked by prime minister Gough Whitlam.
During his three decades at the BoE, Hauser has been executive director for markets, executive director for banking, payments and financial resilience, chair of the audit and risk committee and head of the fair and effective markets review.
RBA governor Michele Bullock. Louie Douvis
In the mid-2000s, he was the head of the bank’s inflation report, which is responsible for inflation forecasting.
He has held other managerial and analytical positions including in monetary analysis and strategy; structural economic analysis; business strategy and finance department; wholesale market supervision; and financial market structure and regulation.
Hauser represented the UK on the board of the International Monetary Fund from 2004 to 2006 in Washington.
Observers say he is a good complement to Bullock’s skills and helps fill voids created by the exit of Lowe, Debelle and former assistant governor Luci Ellis.
He enjoys getting into the weeds of financial markets and had already made well-considered contributions with an outside lens at RBA meetings, sources say.
One senior observer says Hauser’s experience running the BoE’s quantitative easing or bond-buying program and the subsequent balance sheet reversal after the gilts crisis passed will provide important lessons for the RBA.
The bank is currently slowly reducing its $478 billion balance sheet by passively letting maturing bonds run off, which it had acquired during the pandemic stimulus.
Over time, Hauser’s perspective will influence whether the RBA shifts to a more active quantitative tightening by selling bonds back to the market or Treasury, as other central banks such as the BoE are. Kent, assistant governor for financial markets, will also be closely involved in advising the board. The gilts crisis during the Truss government will inform Hauser’s contributions.
For the record, Truss in her top-selling book blames the BoE and the UK Treasury for helping fuel the crisis, and asserts that the “government bureaucrats” disloyally resisted her tax-cutting, supply-side agenda.
“I was frustrated at the apparent inability of the Treasury and Bank of England to provide reassurance to the markets. They had not forecast the scale of the reaction, not had they taken sufficient action to avert it,” Truss wrote.
It didn’t help that Truss and her chancellor, Kwasi Kwarteng, had bypassed the customary process of consulting the Office of Budget Responsibility on their fiscal plan.
Liz Truss delivering her resignation statement outside 10 Downing Street. Bloomberg
Pressed for a response to Truss’ claims, Hauser does not want to engage in a war of words with her, respectfully noting that “she was prime minister, and I was a middle-ranking central bank official.
“Prime ministers, ex-prime ministers are entitled to their views, but we were doing what the public asked us to do,” he says. “Our job is to keep low and stable inflation and to maintain financial stability.
“It is not the central bank’s job, to second guess, or challenge, the fiscal choices of a democratically elected government,” he says. “As Carney once said to me, ‘stay in your lane, Hauser’.”
Hauser says Truss had identified the right problem – the UK’s lack of economic growth. “The question is, where’s the next round of growth coming from? That’s what Truss was trying to do, actually – go for growth.
“It wasn’t the right plan, but the underlying analysis was that without growth economies are in trouble. She asked the right question.”
Truss had earlier sacked Treasury secretary Sir Tom Scholar, an associate of Hauser’s. Truss, reportedly, considered sacking Bailey – the governor Hauser was reporting to.
Bailey survived. Truss sacked Kwarteng as chancellor and announced her own resignation after just 45 days as prime minister.
The test of independence
Hauser says that central bank independence has been “tested” over the past five years, a period that includes the pandemic and other crises when central banks bought trillions of dollars of government bonds to suppress borrowing costs and stimulate locked-down economics.
He says the institution of central bank independence is important because it helps achieve low inflation, avoid higher-risk premiums in borrowing rates and gives the public confidence to plan for a low and stable inflation future.
But, he admits, independence cannot be taken for granted.
“Our job is to keep inflation low and stable and inflation has not been low and stable,” Hauser says of central banks around the world.
“It is important for central banks, like all public authorities to understand that we are accountable to the public,” he says. “We act only under the delegated authority through the political process.
“When you are responsible for having a [inflation] number that should be two to three and it’s 10, you can expect for there to be substantial public challenge about whether you’re up to the job, what you’re doing and how you’re doing it.
“We should never forget that the authority that we’re given by the public can be taken away,” he says. “And we have to get into work every morning remembering that we’re here to serve the people.”
Hauser is not keen to talk on-the-record about Australian politics, or the Albanese government’s recent budget. Bullock is likely to be asked about the budget at a Senate hearing on Wednesday.
Hauser says the public debate in Australia is “extremely spirited” and that is healthy. He wants to continue with the RBA’s “authoritative, unpoliticised, straight-down-the-middle analysis” on economic issues.
Beyond mining
His early impressions are that Australia has economic opportunities beyond its traditional strengths of mining as the world aims to transition to net-zero carbon emissions.
“The next endowment that Australia needs to embrace are above ground – the sun and the wind,” he says.
He has met “renewable energy superpower” advocate and former economic adviser to Labor prime minister Bob Hawke, Ross Garnaut.
“The comparative advantage that Australia potentially has, in that space, properly developed and properly harnessed – to me, and I’m an outsider – looks like the source of a real sense of optimism over the next five, 10 or 15 years,” Hauser says.
Before leaving the BoE, his former colleagues prepared him for Australia in a very British kind of way. In front of about 300 colleagues, Bailey presented Hauser with a “Let’s Talk Strine” book, slang for the Australian language.
But it was the piece of sandpaper that cricket tragic Bailey presented Hauser with that really miffed him. The lanky red head is 6 foot 3 inches (1.9 metres) and could be mistaken for a fast bowler. But surprisingly for a British middle-aged male, he is not a cricket watcher, nor a football (soccer) fan.
Hauser was not really familiar with the 2018 Australian cricket team ball-tampering scandal, also known as “Sandpapergate”, though judging by the laughs in the room, most BoE officials were acutely aware of the incident.
“I don’t know anything about cricket,” Hauser muses. “He [Bailey] said, ‘look, anytime you have trouble in Australia, and you need a bit of help, show this, and people will understand’.
“This was a very vicious joke at my expense,” Hauser says.
The sandpaper is now framed and due to be hung on his office wall, with a satirical tribute, “In Affectionate Remembrance of Andrew Hauser, who left the Bank of England on 9th February 2024.”
“Deeply lamented by a large circle of sorrowing friends and acquaintances,” he says. “The body will be cremated and the ashes taken to Australia.”
Hauser does not appear to be planning to rub salt into the wounds of Australians about the sandpaper controversy. Colleagues say he has been testing some self-deprecating jokes about cricket to endear himself to the Australian public.
As for the future direction of interest rates, Hauser muses that there are shirts printed for the bank’s officials with the slogan, “We’re not ruling anything in or anything out.”