Australia’s government risks compromising the Reserve Bank’s independence if it names a career bureaucrat as the next governor, opposition leader Peter Dutton said, with an announcement due by the end of the month.
(Bloomberg) — Australia’s government risks compromising the Reserve Bank’s independence if it names a career bureaucrat as the next governor, opposition leader Peter Dutton said, with an announcement due by the end of the month.
Candidates considered frontrunners to replace incumbent Philip Lowe include the head of the Department of Finance Jenny Wilkinson and Treasury chief Steven Kennedy. But Dutton, leader of the center-right Liberal Party, said the government shouldn’t name someone who has worked closely with it.
“We’ve gone through the independence of that position, and it shouldn’t be compromised by a quasi-political appointment by the treasurer or the prime minister,” Dutton said Thursday. “It needs to be somebody who is independent and has the best interests of the Australian public in mind.”
Lowe’s seven-year term expires in mid-September and Treasurer Jim Chalmers said Wednesday that he intends to take a recommendation on the governor to Cabinet “soon,” declining to specify a date to avoid pre-empting discussions. The announcement would “ideally” come immediately after that, he said.
While the government isn’t obliged to take the opposition’s views into account, Chalmers has sought a degree of bipartisanship on the central bank. He shared the recommendations of a recent review of the RBA with shadow treasurer Angus Taylor and said on Wednesday he’d had preliminary discussions with his opposition counterpart on the governor’s position.
Dutton’s intervention therefore opens up the possibility of a political struggle over a position that’s supposed to be beyond the divide of politics.
While the current governor could have his term extended — his two predecessors received an additional three years — antagonism toward Lowe is strong and he seems unlikely to be reappointed.
The last RBA chief to come from outside the central bank’s ranks was Bernie Fraser, who shifted from Treasury in 1989. He established the 2-3% inflation target and laid the ground for RBA independence that was formalized in 1996.
In addition to Wilkinson and Kennedy, Deputy Governor Michele Bullock is also a likely contender for the top job. Other names raised include former RBA No. 2 Guy Debelle, who resigned in March last year to take up a role in the green energy industry.
While Lowe has been a lightning rod for criticism among left-wing lawmakers and sections of the public, he has garnered support from opposition finance ministry spokesperson Jane Hume, who earlier this month called for the governor to be extended.
Lowe faced widespread criticism for forward guidance delivered during the pandemic that interest rates were unlikely to rise before 2024. Instead, as inflation spiked, the RBA began hiking in May 2022 and has now increased borrowing costs by a cumulative 4 percentage points, its most aggressive tightening cycle in more than 30 years.
Liberal Party Senator Andrew Bragg said that the lengthy process over whether to renew Lowe may have hurt Australia’s “capacity to restrain inflation.”
He accused the government of running a “personal” campaign against Lowe and said jettisoning the governor wouldn’t help efforts to bring consumer prices under control. Australia’s inflation rate was 7% in the first three months of the year and second-quarter data is due on July 26.
“A governor has not been removed during a tightening cycle,” Bragg said Wednesday in a statement. “We must not undo 30 years of RBA independence.”
–With assistance from Swati Pandey.
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