Australia’s central bank chief Philip Lowe has come in for renewed criticism by the media and some politicians after it was reported that he had briefed banks in a closed-door gathering last week after the monetary policy decision.
(Bloomberg) — Australia’s central bank chief Philip Lowe has come in for renewed criticism by the media and some politicians after it was reported that he had briefed banks in a closed-door gathering last week after the monetary policy decision.
The off-the-record briefing on Feb. 9 sparked little market reaction, though some commentators have said it’s yet another example of poor communications by the Reserve Bank of Australia during its sharpest tightening cycle in a generation. The public scrutiny prompted the bank’s Assistant Governor Luci Ellis to pull out of a similar private briefing which had been scheduled for Wednesday, according to local media.
The meeting on Feb. 9 was just two days after the central bank lifted rates by a quarter percentage point as expected, but surprised investors by saying more hikes are needed to crush stubbornly-high inflation. As usual, the bank did not hold a press conference to explain the decision.
Lowe hasn’t spoken publicly since mid-December but he is scheduled to give testimony in parliament on Wednesday and Friday this week.
“I think there’s a broader issue here about how the bank communicates the context for its decisions,” Treasurer Jim Chalmers said on Sunday, when asked to comment on reports of the private event. The government ordered a wholesale review of the RBA when it took office last year, with the final recommendations due next month.
“This is one of the things that I’ve been discussing with the RBA review panel – how they communicate their decisions and the context behind their decisions is one of the key focuses of that,” Chalmers told the Australian Broadcasting Corp., reiterating that he will use the findings of the report to make a decision on whether or not to renew Lowe’s term, which currently ends in September.
“He’s got a hard job to do. He’s got to balance getting on top of this inflation challenge without crunching the economy,” Chalmers said.
Private events with market participants are not uncommon in Australia but give the impression that bigger firms are gaining exclusive access to information. The Bank of England ceased off-the-record briefings between members of its rate-setting committee and individual private financial institutions in 2021 after public criticism, with the bank arguing ending the practice would improve transparency.
A spokeswoman for the RBA said that at the meeting Lowe reiterated what was in last week’s monetary policy statement, adding that he was there to listen to the views of others.
Lowe has been the target of growing criticism, with lawmakers from the Greens Party calling for him to be fired and some parliamentarians from the ruling Labor Party questioning whether his term should be extended. The Greens hold the balance of power in the upper house of parliament, although the government doesn’t need parliamentary approval to extend Lowe’s term or to appoint someone new to the role.
“It’s hard to say what the impact has been,” said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney, adding both the governor’s Feb. 7 statement and the quarterly policy outlook on Feb. 10 sent “a pretty hawkish message.”
“I guess hearing it from the horse’s mouth might have converted some doubters, given Lowe’s prior perception as leaning dovish,” he said, adding that he didn’t attend the meeting. There were representatives from the big four Australian banks at the meeting including Westpac, according to the Australian Financial Review newspaper.
The RBA has raised rates by 3.25 percentage points in nine consecutive meetings since May from a record low 0.1%, and has said further hikes are in the offing.
During this time, it has been criticized for keeping interest rates too low for too long and then unexpectedly pivoting to smaller quarter-point increments when global counterparts were still moving in larger steps.
Some see Lowe as a political scapegoat for adding to cost of living pressures by lifting borrowing costs. Australian households are among the most heavily indebted in the developed world, with a debt-to-income ratio of 188.5%.
–With assistance from Garfield Reynolds.
(Updates to add chart. The spelling of the treasurer’s name in the sixth paragraph was corrected in an earlier version of this story.)
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