A Monash University economics expert is available to discuss the Reserve Bank’s appointment of Michele Bullock and why Philip Lowe was not re-appointed.
Dr Isaac Gross, Lecturer Department of Economics, Monash Business School
Contact: + 61 490 819 643 or isaac.gross@monash.edu
Read more of Dr Gross’ commentary here: Monash Lens
From 2011 to 2013 Dr Isaac Gross worked as an economist for the Reserve Bank of Australia.
The following can be attributed to Dr Gross:
“The Reserve Bank of Australia will have a new – and, for the first time in its 63 year history, female – Governor in September with Michele Bullock being tapped to lead the central bank. Michele was appointed as she has considerable experience working as a central banker and – just as importantly – is fully committed and able to implement the findings of the RBA Review.
“While this does represent a changing of the guard it will not mean a significant change for interest rates. Michele has been a member of the Board that has increased interest rates by more than 4 per cent over the past year and it is unlikely she will change the path that the Board is currently on.
“There are three key reasons why Philip Lowe not re-appointed.
"The first is the mistake he made trying to keep the unemployment rate high to reign in house prices prior to the pandemic. The RBA had a deliberate policy of keeping interest rates high, which led to higher unemployment in an effort to stop house prices from rising. This cost the Australian economy more than 200,000 jobs and was a significant policy error.
“The second reason was the mistaken approach to forward guidance – effectively promising Australian households that interest rates would stay at 0% until 2024. This obviously turned out not to be an accurate forecast and damaged the RBA’s credibility with the public.
“Finally, the Review of the RBA made it clear that the RBA has a severe cultural problem with a hierarchical work environment in which bad decisions are not questioned, the staff are not listened to and diversity of thought is not encouraged. Changing the leadership of the RBA is needed to reform the RBA, which is why the government ultimately decided not to extend Phil Lowe’s term.”
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