Philip Lowe is the easy fall guy for our economic woes. But maybe we should have listened to him more closely | Peter Hannam

Reserve Bank governor has been criticised for saying interest rates might not rise until 2024. But that message came with caveats some did not hear

If hindsight is said to come with 20/20 vision, there should be an equivalent for hearing.

Reserve Bank governor Philip Lowe on Monday copped another barrage of attacks after he tried to explain to Senate estimates why in 2021 the central bank was saying interest rates might not rise until 2024.

The rest, of course, is history and also the future since another RBA rate hike is likely on 6 December. Such a move would make it a record eighth consecutive rate increase in as many months.

Much like those earlier messages, however, some pundits seized on parts of Lowe’s message to suit a punchy commentary. Much easier than parsing the context or weighing the intent of what he said.

Lowe certainly makes for decent sport – a bureaucrat on $1m a year who lecturers us to not to chase wage increases that keep up with inflation. But it would be unwise to summarily discount him or the RBA.

Sure, there’s a long overdue review into the banks to improve its operations – and 114 submissions so far to say where – but it would be wiser to tether our complaints to reality. Along with perhaps the high court, we have few institutions that remain mostly above the political fray, and the RBA is among them if only just.

Lowe, of course, doesn’t always help himself, giving two parts of an apology that on their own invited some media disdain.

First, Lowe said he was “certainly sorry if people listened to what we’d said and then acted on that … So that’s regrettable. I’m sorry that that happened”.

Later in the same circuitous answer to Greens senator Nick McKim, Lowe doubled up: “I’m sorry that people listened to what we’d said and acted on that, and now find themselves in a position they don’t want to be in.”

He was taken to mean: We’re only the central bank, why’d you listen to us, and if you did and took out excessive debt so that you’ve been caught short when rates rose, well, sorry!

However, just as in 2021, Lowe couched his comments in context. After all, central bank governors, much like politicians, rarely give single answers.

The economy in 2020 and 2021 were “dire” and the RBA “wanted to do everything we could to help the country get through that”, he said.

“We also thought that given the dire outlook, it was unlikely that inflation would pick up quickly [so we wanted] to send a message that interest rates were going to stay low for a long period of time,” Lowe said.

Guilty as accused, then?

Not so fast. Looking back, Lowe “would have chosen different language … People did not hear the caveats in what we said”.

“My language was always caveated,” he says, which is true if you look at the statements. They carried conditions as they always do – including the current ones about whether the RBA might pause its rate hikes or return to “super-sized” ones.

It depends on what’s happening to prices, or more importantly, what households and businesses think will happen since such sentiment tends to be self-fulfilling.

Of course, few except monetary policy wonks, economists or bond traders read every statement the RBA says. And the bank should have done more to underscore the possibility that, if conditions changed, so would rates.

Lowe is an easy fall guy to blame for our own failures to hedge against shifting economic fortunes.

It’ll take a brave treasurer now to reappoint Lowe when his term ends next September.

But whoever gets the job, that person can expect more turbulent times, as Lowe himself warned just last week. Perhaps we’ll be listening more carefully from now on.


Peter Hannam

The GuardianTramp

Related Content

Article image
Philip Lowe leaves clues his rate-rising work may be done – bar an Easter finale | Peter Hannam
The RBA governor has ditched his hawkish tone and the odds now seem to favour just one more rise, probably in April – but that could change

Peter Hannam

07, Mar, 2023 @2:00 PM

Article image
Philip Lowe has a good game face. If he has any doubts over his decisions, they aren’t showing | Katharine Murphy
The RBA governor came to Senate estimates armed with messages he wanted to convey and an inclination to avoid all trapdoors

Katharine Murphy

15, Feb, 2023 @8:00 AM

Article image
Few signs of economic life as inflation stays stuck in its rut | Greg Jericho
The latest sluggish figures increase the odds of the Reserve Bank embarking on another interest rate cut

Greg Jericho

29, Jan, 2020 @4:30 PM

Article image
Philip Lowe admits the RBA erred on its rate rise timing – but there were messaging misfires too | Peter Hannam
Could Australia’s reserve bank have done a much better job of controlling inflationary expectations?

Peter Hannam

09, Sep, 2022 @12:45 AM

Article image
More light and less heat would be appreciated at Philip Lowe’s next grilling on Friday
Lost in the questioning from hostile senators was much insight into why the Reserve Bank wants to keep raising rates

Peter Hannam Economics correspondent

15, Feb, 2023 @2:00 PM

Article image
Will the RBA lift the cash rate this week to counter inflation – or wait until after the election?
Analysis: The Reserve Bank of Australia finds itself in a strategic and political bind. Credibility is at stake

Peter Hannam

01, May, 2022 @5:30 PM

Article image
IMF outlook for world economy could herald dark clouds for Australia
Analysis: Treasurer Jim Chalmers will no doubt reveal inherited budget bungles but he won’t need to look far for new tales of economic woe

Peter Hannam

26, Jul, 2022 @10:07 PM

Article image
Labor urges fiscal stimulus as IMF downgrades Australia's economic growth
The International Monetary Fund tips growth will be 1.7% in 2019 but is expected to recover to 2.3% in 2020

Paul Karp

15, Oct, 2019 @8:05 PM

Article image
Can Labor provide cost-of-living relief without feeding inflation and interest rates? An expert panel responds
Anthony Albanese says the government can’t afford to provide energy payments or other relief because to do so would put even more pressure on the RBA to raise interest rates – is he right? Three economists have their say

John Quiggin , Angela Jackson and Stephen Koukoulas

04, Nov, 2022 @7:00 PM

Article image
The Reserve Bank has to navigate a path away from inflation but the economic signals are months old | Peter Hannam
While backward-looking labour market data is still robust, property prices provide a taste of the deteriorating outlook

Peter Hannam

02, Aug, 2022 @5:30 PM