Reserve Bank governor Dr Philip Lowe will not be reappointed by Anthony Albanese’s government, despite the central banker saying he was hoping to keep the role.
Daily Mail Australia can confirm the government has decided not to reappoint Dr Lowe, with Cabinet to meet this morning to decide on his replacement.
That’s despite Dr Lowe, who is paid a total package of $1,037,709 including a base salary of $890,252, saying he would be ‘honoured’ to keep the role at an event on Wednesday.
Two of the leading candidates for the position are Treasury secretary Steven Kennedy and Finance secretary Jenny Wilkinson.
The Reserve Bank’s deputy governor Michele Bullock is also considered as a leading contender.
Dr Lowe has faced widespread criticism after telling the Australian public the cash rate would not increase until 2024 – before proceeding to lift it 12 times from 0.1% to 4.1%.
Dr Philip Lowe will not be reappointed as Reserve Bank governor
Dr Lowe was also heavily criticised for comments he made in 2021 indicating that interest rates would remain at the record low level of 0.1 per cent
Inflation in Australia has remained persistently high despite the successive hikes in interest rates, and sits at 5.6 per cent, well above the RBA target range of below three per cent.
Dr Lowe is expected to travel with Treasurer Jim Chalmers to India at the weekend, ahead of his term finishing in September. He will remain governor of the Reserve Bank through a further two interest rate decisions.
Ahead of the announcement, Dr Lowe spoke out with unusually frank advice for the Labor government at an event in Brisbane on Wednesday.
He raised concerns about the potential ramifications if the government gave in to demands for further wage increases, warning that they would contribute to a deepening of inflationary pressures.
Dr Lowe warned of a price-wage spiral – in which price rises are used to justify wage increases – which only serves to make things more expensive.
‘If we saw Australia in the same situation as in the US, Canada, and UK, where wages are growing at six per cent, that would have implications for our setting of monetary policy,’ Dr Lowe told the Economic Society of Australia in Brisbane.
‘We will get inflation back to target, and we’re going a bit slower than others because we want to preserve the gains in the labour market.
‘If it turns out we can’t do that, we will have to take the decision to be tougher.’
This echoes comments Dr Lowe made in June that contradicted Dr Chalmers’ claim higher wages are not fuelling inflation.
In what may be his last public address as Reserve Bank Governor, Dr Philip Lowe (pictured in April) has issued some dire warnings and frank policy advice
Read Related Also: Why electric cars are NOT green machines: The environmental benefit of EVs may never be felt
Dr Lowe warned that higher wages are likely to be inflationary, echoing comments that have seen him attract heavy criticism
Dr Chalmers said last month an 8.6 per cent increase in the minimum wage had not had any impact on interest rates, which have had to be increased 12 times in the space of a year to calm runaway inflation.
However, Dr Lowe said ‘compensating’ workers for higher inflation was getting ‘ourselves into trouble’.
‘Because if you accept that premise, and inflation’s seven per cent, wage rises match that, what do you think inflation will be next year?’ he said.
‘It will be high again and then you’ll have to have higher wage increases again.’
During his Wednesday lunch address, Dr Lowe also said the growing price of home loans would not reduce home values because of high levels of migration pushing up demand.
Over this and next financial year, about 715,000 people are expected to come into Australia on working, student or other longer-stay visas.
‘All these people coming in have to live somewhere,’ Dr Lowe said.
‘That is pushing up rents and housing prices.
‘We thought housing prices would continue to decline this year but they are not, in Sydney, they are rising quite strongly again, and that is partly due to the influx of immigration.’
Dr Lowe said the nation’s political and business leaders urgently need to invest in expanding Australia’s housing capacity to keep home prices in check so people have money to spend rather than be tethered to huge mortgages for decades.
‘If we’re going to have a lot more people in the country, which is good, we need the capital stock to support those people – otherwise the capital/labour ratio declines and that is bad for productivity,’ he said.
‘Population growth brings huge advantages to the country, but we need governments and businesses to keep investing to build a capital stock to support a stronger population.’
At the event, Dr Lowe was again forced to defend comments he had made during the Covid pandemic that rates were unlikely to rise until 2024 – predictions that were not met and may have contributed to some borrowers over-committing and taking on bigger debts than they could afford.
Australia is not adequately prepared for the influx of 715,000 people on longer-stay visas, Dr Lowe argued
Dr Lowe said his comments were the right thing to do during the economic uncertainty of the pandemic.
‘What we are trying to do with our communications is to tell people what we are doing, why we are doing it, the facts we are taking into account,’ he said.
‘During the pandemic, we had a different approach because, at the time, we thought we were in truly dire circumstances. We were explicit about what we thought was the path to interest rates and it turned out we were wrong.’
Asked about whether he wanted to continue as RBA governor, Dr Lowe said he would be ‘honoured’ to keep the job.
However, if that did not happen, he pledged to do all he could to support his successor.
