As Australian central bank Governor Philip Lowe prepares for his first public appearance of the year on Wednesday, speculation is mounting that he won’t be offered an extension in the role, prompting local media to begin looking at possible successors.
(Bloomberg) — As Australian central bank Governor Philip Lowe prepares for his first public appearance of the year on Wednesday, speculation is mounting that he won’t be offered an extension in the role, prompting local media to begin looking at possible successors.
Lowe’s seven-year term expires in September and Treasurer Jim Chalmers has deferred discussion of the Reserve Bank chief’s future until after he receives a review of the central bank on March 31. The governor’s two predecessors — Glenn Stevens and Ian Macfarlane — received three more years at the helm.
But the prospects of Lowe obtaining similar appear to be waning.
One obvious replacement is his deputy, Michele Bullock. She would be the first woman to lead the RBA and in recent times the No. 2 RBA official has taken over from the outgoing governor. However, Bullock’s handicap is that she has only been in the role for 10 months and may not be seen as ready to lead yet.
In addition, some economists say promoting a career RBA official like Bullock, who lacks private sector experience, would do little to address concerns about group-think and insularity at the central bank.
Another possibility is one of the members of the three-person panel reviewing the RBA, Carolyn Wilkins, according to several economists. She served as senior deputy governor at the Bank of Canada from 2014 to 2020, so benefits from outside experience, and would be ideally placed to implement any changes recommended by the review.
Then there’s Finance Department Secretary Jenny Wilkinson, who has been mentioned by a number of economists.
One other name regularly raised is former Deputy Governor Guy Debelle, who quit in March 2022 to join billionaire Andrew Forrest’s clean-energy venture. Debelle served 5-1/2 years in the No. 2 role and when asked by Bloomberg if he would be keen to make a comeback, declined to comment.
Limited Talent Pool
The Australian Financial Review cited Chief Statistician David Gruen, former Treasury Secretary Martin Parkinson, who served on the RBA’s board, and Meghan Quinn, who now heads the Department of Industry, Science and Resources, as other potential candidates.
Despite the names making the rounds, the local talent pool appears limited for the top job. That may encourage Chalmers to extend Lowe in the end, in order to give Deputy Governor Bullock more time to develop.
Yet the push for change appears to have momentum. The Australian newspaper on Tuesday cited unidentified senior government ministers as saying Lowe’s term won’t be extended.
The governor has made mistakes during his tenure. The starkest was his guidance that interest rates were unlikely to rise until 2024, which has only been compounded with each of the nine consecutive rate hikes since May.
The RBA also bungled its exit from yield-curve control and has faced repeated criticism over its communication. The most recent was when Lowe attended a closed-door briefing with rates traders — despite not having made a public appearance to explain a hawkish policy shift.
While the RBA’s Feb. 7 quarter-point hike to 3.35% wasn’t unexpected, Lowe’s comments that more increases would be needed in coming months were, particularly after he said in December policymakers considered a pause.
Yet the governor gave no press conference or speech after his decision, leaving an information vacuum.
Unfairly Maligned
Still, some economists believe the RBA is being unfairly maligned for raising rates in an economy which is among the most indebted in the developed world. The bank has hiked by 3.25 points since May from a record low 0.1%.
“While some criticism of the RBA is justified, criticizing it for trying to fulfill its mandate in an environment of high debt tacitly or otherwise allowed by generations of policymakers and regulators puts the bank in a very difficult position,” Alex Joiner, chief economist at pension fund IFM Investors Pty, said on Twitter.
When Lowe appears before senators on Wednesday morning, he will possibly be asked if he deserves another chance.
In December, he expressed no desire to step down, saying he has an “important job to do” in getting inflation down. The RBA’s forecasts show headline CPI will only hit the top of its 2-3% band in mid-2025, from 7.8% in the fourth quarter.
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