By Wayne Cole
SYDNEY (Reuters) – With a July policy meeting done and dusted, the head of Australia’s central bank is waiting to hear if he will remain at the helm or take an early exit as past policy missteps come back to haunt him.
Markets are still in the dark whether Treasurer Jim Chalmers will reappoint Reserve Bank of Australia (RBA) Governor Philip Lowe or bow to public pressure for a new pair of hands at an institution that stumbled over its policy messaging during the pandemic.
Chalmers is to decide this month whether to extend Lowe’s current seven-year term when it ends on Sept. 17, and has been frustratingly silent on the issue.
Lowe has been under a cloud since repeatedly saying in 2021 that interest rates would not rise until 2024, only to reverse course and hike in mid-2022 when inflation unexpectedly surged.
In November, Lowe apologised to people for taking out mortgages based on his guidance, saying: “At the time we thought it was the right thing to do and I think, looking back, we would have chosen different language.”
While the RBA provided some relief to aggrieved borrowers on Tuesday by leaving rates steady after 12 painful hikes, Chalmers was not around to give his usual post-meeting conference and will not be back in work until next week.
Lowe is due to give a speech on the economy on July 12 and is bound to be asked about his future, but is likely to reply that it is all up to Chalmers.
Markets have so far been sanguine about the drawn-out process, assuming the RBA will end up in safe hands given the rumoured short list of candidates is a capable one.
“Markets would be more concerned if there wasn’t that list,” noted Shane Oliver, chief economist at AMP Capital. “Everyone mentioned is a perfectly reasonable pick, so that has eased the uncertainty.”
Names in the frame include the current deputy governor of the RBA, Michele Bullock, and the head of the government’s finance department, Jenny Wilkinson, who spent more than a decade at the central bank.
They are among the front runners in part because there is much pressure for Chalmers to appoint the first female head of the RBA.
One dark horse also being mentioned is Guy Debelle, a former RBA deputy governor who resigned last year to join the green energy business of mining billionaire Andrew Forrest.
It is possible Chalmers could reappoint Lowe for a shorter period to see out the RBA’s current tightening cycle and planned changes in its operation and structure.
“Keeping Lowe for a time makes the most sense,” said AMP’s Oliver. “Changing jockeys in the middle of a race is never a good idea.”
(Reporting by Wayne Cole; Editing by Shri Navaratnam)
