It’s one of the most powerful finance positions in the country, with the opportunity to control the price of money. So how does one become a central bank governor?
Those inside the Reserve Bank of Australia will be asking themselves that very question this morning, as assistant governor Philip Lowe looks set to take over (one day) from current boss Glenn Stevens as the bank’s top dog.
Treasurer Wayne Swan announced Lowe’s ascension to the role of deputy governor yesterday, with AiG boss Heather Ridout also being appointed to the RBA board to take the spot of BlueScope Steel chairman Graham Kraehe.
But for those with serious aspirations of becoming governor (a position so influential we recently made Stevens our no.2 most powerful Money Mover) a long apprenticeship at Martin Place is clearly a must.
Stevens has spent more than 30 years inside the marble walls of the central bank, a tenure matched by his new right-hand man (who’s three years younger). Both have also done time in a series of different policy departments, including stints as head of the bank’s Economic Analysis Department.
Outgoing deputy Ric Battellino was another who seemed to enjoy the confines of Martin Place, having spent 39 years there when his term expires next February.
A post-graduate education from North America also doesn’t seem to hurt. Stevens achieved a Masters at the University of Western Ontario, while Lowe completed a PhD at MIT (a school which also produced US Fed chairman Ben Barnanke).
“Phil is a career central banker who has developed an outstanding reputation in this Byzantine profession,” says economist Christopher Joye. “He is regarded as the second-most-hawkish guy inside the RBA after Ric Battellino, who he now succeeds as deputy governor.”
Lowe’s appointment comes on the eve of the bank’s latest interest rate announcement. And while many will be tuning in today in anticipation of a rate cut (Centrebet is giving odds of $1.55 on a 25 basis point cut), those keeping their eye on the comings-and-goings of Martin Place will be looking for any distinctive long-term change in RBA policy.
“In his statements, Phil is consistently more hawkish on inflation, and bullish on Australia’s future growth prospects, than his boss, the governor, whom comes across as comparatively dovish,” says Joye. “As governor, Phil’s biggest challenge will be dealing with a Board dominated by highly conflicted private sector representatives who are rarely disposed to calling for higher interest rates.”
With clouds hovering over the economies of both Europe and the US, Lowe’s rise to the top comes at a difficult time for central bankers. His boss Glenn Stevens was effusive in his praise for Lowe this morning. “Dr Lowe is an exceptional economist and a valued colleague. He has had a distinguished career at the bank since joining in 1980, covering the full cross-section of the bank’s activities,” he said in a statement.
Meanwhile, Women on Boards executive director Claire Braund says AiGroup head Heather Ridout’s appointment to the RBA board shows it is falling into line with business, government and community expectations for board diversity. “It reflects the growing awareness of the benefits that highly qualified people with diverse backgrounds, experience and gender bring to a business,” she tells The Power Index.
But given the banking sector currently leads other industries when it comes to the representation of women on boards, the government’s appointment process for the RBA has been a little behind when it comes to shoring up gender diversity. Even if some economists, like Saul Eslake, believe gender diversity is irrelevant to the RBA’s decisions making process.
As Braund outlines, the Australian banking sector’s progress on leadership diversity over the last couple of years has been significant, and the RBA needed to come up to speed with it. Westpac has four female directors (including CEO Gail Kelly), the Commonwealth Bank has three and NAB has two (ANZ lags with just one female director). All banks have targets and programs in place to improve gender diversity in management and leadership roles.
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