Outgoing Reserve Bank Governor Philip Lowe gave his final speech in Sydney yesterday after a seven-year term as Governor.
Lowe admitted some of his public statements as Governor had “missed the mark”. He criticised the media, however, for its “vitriol, personal attacks and clickbait”.
Lowe acknowledged the RBA had got “some things right [but] other things wrong” during his tenure and named climate change and housing as key future challenges for Australia.
Philip Lowe’s tenure
Philip Lowe became RBA Governor in 2016 after decades working at the Bank.
The RBA Governor’s job is to oversee the economy to keep inflation (price growth) low and stable at around 2-3% a year, and to keep unemployment low.
For the first few years of his tenure, inflation was at or below 2% and unemployment was relatively high. In the last two years, Australia has faced high inflation but has enjoyed historically low unemployment.
Lowe has overseen several increases to interest rates, designed to control inflation while keeping unemployment as low as possible.
“Too much” COVID support
Lowe said in his final speech he believed “with the benefit of hindsight” that the RBA and the Federal Government had contributed to today’s high inflation by doing “too much” to put money into the economy during the pandemic.
He said the pandemic was a “very scary time” and the intention had been to provide as much support as possible, but that the extra money helped to fuel rising prices after the pandemic.
“Missed the mark”
Lowe acknowledged communication “difficulties” during his tenure which attracted public criticism. One was a comment in 2022 that interest rates were not expected to increase by 2024. Lowe said this should not have been understood as a “commitment” but there was “a lot to be learned… about how to communicate in uncertain times”.
He also suggested the media had misreported comments he made about housing, for example by claiming he had said “everybody needs to get a flatmate”, which Lowe said was a misinterpretation.
In his final speech, Philip Lowe also highlighted a series of challenges facing Australia including climate and housing.
Lowe suggested climate change would continue to contribute to unstable prices (e.g. by affecting agriculture), and criticised Australia’s choices about “how we design our cities… and how we tax land and housing investment”, which he said had fuelled the housing crisis.
Lowe also called for the use of tools other than interest rates to fight inflation, specifically tax.
He suggested an RBA-like body could be set up with some power to raise taxes during periods of high inflation, rather than relying solely on higher rates.
Philip Lowe’s successor
Philip Lowe’s successor is Michele Bullock, who is currently his Deputy. Bullock has worked for decades at the RBA and will take over next week.
She will become the Bank’s first female Governor.