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What cost Philip Lowe his job

RBA - ECONOMICS ESTIMATES
Outgoing Reserve Bank governor Philip Lowe heads for the exits in just nine days. Picture: NCA NewsWire / Martin Ollman

The Reserve Bank expects 140,000 people will lose their jobs by the end of 2025.

And in just seven days time, Philip Lowe will be one of them.

After a 43-year career at the country’s central bank and a seven-year stint as its head, outgoing governor Philip Lowe will soon exit the Reserve Bank’s headquarters at 65 Martin Place in Sydney for the final time.

While Dr Lowe’s initial years as the nation’s top central banker were largely uneventful, the RBA’s punishing round of 12 interest rate hikes – which sent the cash rate up by 400 basis points in 13 months – means the institution has scarcely ever been more scrutinised.

At the centre of the furore has been Dr Lowe, the mild-mannered bureaucrat who was thrust into the spotlight and exposed to interminable public and political vitriol.

Philip Lowe
Outgoing RBA governor Philip Lowe has come under sustained pressure as the central bank hiked rates 12 times. Picture: NCA NewsWire / Gary Ramage.

Indeed, Dr Lowe himself has readily conceded he may be the most unpopular person in the country.

Dogged by his complex and convoluted explanations, he has made a series of missteps that generated public fury as rates surged higher.

Chief among these was Dr Lowe’s infamous suggestion in late 2021 that rates would not increase until “at least 2024” – a phrase that would haunt the remainder of his tenure.

Taking this statement at face value, thousands borrowed more than they can now afford and confront the devastating task of meeting increasingly unmanageable repayments.

Later he would apologise for this communication “failure”, saying he would “have chosen different language”.

“I’m certainly sorry if people listened to what we’d said and acted on what we’d said and now regret what they had done,” Dr Lowe told a parliamentary committee in November.

NATIONAL PRESS CLUB PHILIP LOWE
A series of missteps, most notably on the RBA’s forward guidance, has dogged Dr Lowe over the past 16 months. Picture: NCA NewsWire / Gary Ramage

“That’s regrettable and I’m sorry that happened.”.

Dr Lowe would later face accusations that he believed people suffering under the weight of rocketing prices should simply take on a few more hours of work to get by, or find a flatmate to bring down their weekly rent, or move back in with their parents.

“I did not make these points,” he defiantly stated at his final speech to the Annika Foundation charity in Sydney on Thursday.

An unofficial appearance at a lunch hosted by investment bank Barrenjoey Capital was also perceived as tone-deaf.

Two days earlier, RBA officials had previously said that Dr Lowe was too busy to make a public appearance when the central bank shocked markets with a 0.25 per cent rate hike in February.

PHILLIP LOWE
Dr Lowe has faced intense public scrutiny as the central bank worked to tame soaring inflation. Picture: NCA NewsWire / Jeremy Piper

At the same time, governor Lowe would confront sustained political pressure from all quarters. The government would later throw Dr Lowe under the bus to assuage white hot anger over soaring interest rates.

In June when a government economic forecast proved to be inaccurate, Prime Minister Anthony Albanese justified himself by citing the RBA’s own forecasting mistakes.

“That’s not the only prediction on interest rates that have not been correct,” the Prime Minister chided in June

“It’s not as incorrect as the one saying there’d be no increases till 2024. So these things are all relative.”

But despite all the controversy, if the government achieves the soft landing it so desperately desires, it’ll be because Dr Lowe – not Treasurer Jim Chalmers – got his hands dirty.

QUESTION TIME
Prime Minister Anthony Albanese criticised the Reserve Bank in June. Picture: NCA NewsWire / Martin Ollman

Promisingly, price pressures have eased so far this year, falling from a peak of 7.8 per cent in the December quarter to 4.9 per cent in July.

Amid signs that inflationary pressures are returning to normal, households are cutting back on spending in response to the cost of living crunch.

New GDP figures released on Wednesday showed economic growth has now shuddered to a crawling pace – expanding by just 2.1 per cent in the 12 months to June, down from 2.3 per cent in March.

Put simply, monetary policy is doing what it should be.

Complicating the outlook though is the risk of economic contagion from China’s toxic property sector, as the country’s largest real estate developer Country Garden is on the brink of financial collapse.

The RBA has identified China’s fast-deteriorating property sector as a significant uncertainty facing the Australian economy. Photo: Mohd RASFAN / AFP
The RBA has identified China’s fast-deteriorating property sector as a significant uncertainty facing the Australian economy. Photo: Mohd RASFAN / AFP

And more pain is still on the horizon for everyday Australians as the full impact of restrictive rate hikes take its time to wash through to borrowers.

While inflation is easing across most of the economy, the cost of rent, insurance premiums, and electricity continue to rise.

Despite markets increasingly confident that the country can avoid a recession, Dr Lowe knows that it’s too early to declare victory in the central bank’s fight against persistent price pressures.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame,” the much-maligned RBA governor said, signing off on his final post-board meeting statement on Tuesday.

However, guiding the economy towards a soft landing is no longer Dr Lowe’s problem.

His successor, Michele Bullock, will take up the mantle from September 18. She is also a lifetime Reserve Bank staffer, having joined the institution in 1985.

RBA ECONOMICS COMMITTEE
Incoming governor Michelle Bullock joined the Reserve Bank as a graduate in 1985. Picture: NCA NewsWire / Nikki Short

Questions now turn to how Ms Bullock will walk this narrow path while also contending with the renovation of the RBA as it implements the reforms of a sweeping independent review that was commissioned when Labor came to power.

Expectations are that incoming governor Bullock is unlikely to depart from the central bank’s current policy thinking.

She cannot be easily characterised as either more hawkish or more dovish than her predecessor.

Ms Bullock, who has served as deputy governor since April 2022, was by Dr Lowe’s side at the bank’s monthly board meetings where they opted to increase rates 12 times.

Among economists, Bullock is largely seen as a straight shooter who is expected to bring strong experience and clear communication skills to the role.

Treasurer Jim Chalmers
In July, Treasurer Jim Chalmers announced the biggest overhaul of the RBA in its history. Picture: NCA NewsWire / Gary Ramage

However the formulation of the new Monetary Policy Board, which could include up to seven new external members, is expected to have a far more significant impact on the RBA’s monetary policy process than the change of governor.

Dr Lowe will travel to Switzerland for a final meeting with foreign central bankers at the Bank for International Settlements before finally exiting the bank.

While ex-governors Glenn Stevens, Ian Macfarlane, and Bernie Fraser have all held directorship positions at major banks following their terms as RBA head, Dr Lowe, an ardent golfer, said his immediate priority was to head to the fairways.

“My main objective is to see if I get my golf handicap to single digits,” he confessed to a parliamentary committee in August.

No doubt he hopes his handicap avoids any inflationary woes.