Has there ever been a less credible governor of the Reserve Bank than Philip Lowe at this point?
Earlier this week, Australia’s most senior and authoritative economics columnist, Ross Gittins, fired a remarkable broadside at Lowe, accusing him of being dishonest to a parliamentary committee, of partisanship with big business against workers, and of being “happy for ordinary workers to suffer”.
Sure, other governors, and Lowe himself, have been the target of tabloid criticisms at times of rising interest rates. No one, except inflation hawks and savers, likes rate rises, and pushing rates up will never win you a popularity contest. But the harsh criticism of Gittins — who has probably forgotten more central bankers than the rest of us have ever known — is a very different, and far more serious, matter.
And Lowe did himself no favours yesterday when, the day after the RBA board lifted rates yet again, he told an event held by US bank Morgan Stanley that “if people can cut back spending, or in some cases find additional hours of work, that would put them back into a positive cash flow position.”
While Lowe may have been trying to sound helpful to Australians battered by surging mortgage repayments, a central banker who earns over a million dollars a year and who has enjoyed cut-price home loans courtesy of his role, telling a roomful of investment bankers brought together by a scandal-ridden multinational that ordinary families should just cut spending or work a little harder, is remarkably tone-deaf.
And all the more so given it was just hours after Lowe’s own statement specifically said labour market conditions were easing, raising the question of where, exactly, those extra hours we’re all supposed to work were going to come from.
It was about as tone-deaf as Lowe lecturing renters last week to find more flatmates or move back in with the parents if they didn’t like paying such high rents. Not since Joe Hockey told young people to just go get a better job if they wanted to buy a house has a senior economic policymaker appeared so out of touch. At least as an elected politician, Hockey faced the wrath of voters and his colleagues. Lowe faces none of that.
Needless to say, this doesn’t help rehabilitate Lowe’s reputation as the man who assured Australians interest rates wouldn’t go up until 2024. As it turns out, what he meant to say was that interest rates wouldn’t stop going up until 2024… regardless of the fact that demand from ordinary households is playing only a limited role in inflation compared to factors like profit gouging by corporations.
There’s also the strange inconsistency of “surprise” interest rate rises in May and June, after the much-touted “pause” in April, even as the economy continued as it had earlier this year, wobbling slowly to breakeven, supported by a strong jobs market and an export performance that still defies the odds, with inflation not going away. That pause now looks a wrong call by the RBA’s own lights — and it once again gave false hope.
Lowe’s loss of credibility — and his loss of regard in the eyes of senior figures like Gittins — is a serious problem for the RBA and the economy as a whole. We’re in the midst of one of the most fraught periods of monetary policy decision-making since the RBA increased interest rates while unemployment was still above 9% under Keating. The reputation and credibility of the bank have taken a battering courtesy of its own mistakes. The last thing it needs now is the perception that its governor is an out-of-touch buffoon welded to the side of big business.
But that’s exactly what Lowe has become, and he’s dragged the bank down with him in terms of credibility with the community.
One of the lingering problems in the Australian polity, as elsewhere in the West, is the perception that “the system” — politics and the economy — is operated in favour of powerful interests rather than communities. It breeds alienation, conspiracy theories and extremism — and the populists who exploit that. Lowe seems hellbent on fostering exactly that kind of corrosive sentiment. The end of his term in September can’t come soon enough.
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Comrades, let’s get real. Take a couple of steps back and look at the bigger picture. Focussing on the Governor of the Reserve Bank, Philip Lowe is precisely what the ruling class in our society wants and expects. He is a convenient ‘fall guy’ and by focusing all our attention on him we are ignoring the ‘elephant in the room’ which is, of course, the capitalist system itself. The system that not only fosters, enables, and catalyzes greed and selfishness, but also handsomely rewards those attributes. Sure, by all means, get rid of Phil, but do not be surprised if nothing much changes. It’s not Phil that we need to dispense with, it is the system that allows the Phil’s and the corporate robber barons and so many others, to prosper and flourish. If anything, Phil is only there as a stooge to do the bidding of the capitalist class (the RBA is part of their economic arm in the same way that the Liberal Party (and the Labor Party too) are part of their political arm).
Spot on. Inflation could be stopped in its tracks by introducing price control but who would have the nous to do that? it’s far easier to just let Lowe be the fall guy.
Although Lowe has done himself no favours with his comments over the past few weeks, I can’t help feeling that he is being used as a patsy for our current economic malaise. He, and the RBA in general, only have one tool with which to manage the economy, and that’s interest rates. However, it was not the RBA that dismantled all the other mechanisms that were once available. That was done by politicians who were only too eager to pass the buck and who were more than happy to have a fall guy to pass the blame on to. Ultimately, what we are seeing now is not a single isolated event, nor the failure of one organisation or social entity, but just one more step in the neoliberal journey to Hell we have all been on for the past four decades.
That the system is run in favour of the rich and powerful rather than the community is not a perception, nor is it a conspiracy theory. It’s a fact.
I wonder what the members of the 5% of the able bodied job seeking workforce that are targeted to be unemployed think of Lowe’s advice to return to being cash positive? Probably the same as those who are working limited casual hours and can’t get any more work, let alone a second job.
Until we restructure our political goals to include full employment, we are having ourselves on. How is our government able to claim that we can’t build enough housing due to labour shortages when we have more than 5% of the workforce unable to get the work they want?
Can Lowe go any lower? His spastic arguments on inflation causes has been a wonder.