John Rolfe: RBA boss’ interest rate hike gaffe costs Aussie home buyers

The Reserve Bank of Australia’s boss, Philip Lowe, should apologise for compromising home buyers’ decisions with misleading predictions, writes John Rolfe.

“C’mon people. You can bid with confidence. The RBA governor has said interest rates won’t rise until 2024.”

Words to this effect were used by real estate auctioneers across Sydney and the nation after RBA boss Philip Lowe in March 2021 said the cash rate was “very likely” to remain at 0.1 per cent for three years or more.

Following Tuesday’s front-page story on growing criticism of the Reserve Bank’s handling of monetary policy, some commenters have argued that home buyers who borrowed big sums should have seen the writing on the wall.

My response is, what writing?

The most solid piece of information going round was what Mr Lowe said – again and again.

Philip Lowe, the Governor of the Reserve Bank of Australia buys some lunch before heading to the office in Sydney., Picture: Jeremy Piper

In September 2021, he said “I find it difficult to understand why rate rises are being priced in next year or early 2023.”

Then in November 2021 he said “I still struggle with the scenario in which rates need to be raised next year … not impossible, but I would say it’s extremely unlikely.”

The Governor of the Reserve Bank of Australia should apologise for stuffing up his economic predictions, affecting some home buyers. Picture: Jeremy Piper

Mr Lowe should not have made these predictions.

His comments didn’t just affect some home buyers.

Many people who might have switched from variable-rate to fixed-rate loans did not do so because of what Mr Lowe said. Then fixed rates took off.

It would be nice if Mr Lowe said “sorry, I stuffed up.”

It’s not impossible, but I would say it’s extremely unlikely that he will.