Phil Lowe’s ill-fated rates promise before his RBA reign was ended

In 2021, Phil Lowe made a promise to Australians. Four key words haunted him until his reign as RBA governor ended on Friday.

Philip Lowe is the first governor in nearly 30 years not to have his tenure extended.

Treasurer Jim Chalmers and Prime Minister Anthony Albanese announced on Friday that Dr Lowe’s term as governor of the Reserve Bank of Australia would end in September after serving in the top post for seven years.

Michele Bullock will become the ninth governor of the RBA, with her seven-year term beginning on September 18.

Both of Dr Lowe’s predecessors, Glenn Stevens and Robert Macfarlane, had their terms extended to 10 years, and while that same option was available to the government for Dr Lowe, it has opted for a change of leadership.

Dr Lowe’s infamous promise to Australians, made as late as 2021, that interest rates would not rise again “until at least 2024” is likely to have been a key factor in the cabinet’s decision not to keep Dr Lowe in the role.

Phil Lowe’s tenure as RBA governor will not be extended. Picture: NCA NewsWire/Tertius Pickard

Dr Lowe first made the call in February 2021 and continued to repeat it throughout the year.

“The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,” he said.

“For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market.

“The board does not expect these conditions to be met until 2024 at the earliest.”

He repeated the phrase “until 2024 at the earliest” in statements released in March, April, May and June before the wording changed slightly in July.

That month, in announcing the cash rate would remain at 10 basis points, he said the central bank would not increase the cash rate until actual inflation was within the 2 to 3 per cent target range.

“The bank’s central scenario for the economy is that this condition will not be met before 2024,” he said.

He repeated the phrase in August, September and October before the 2024 deadline was quietly dropped from the bank’s messaging in November.

Dr Lowe’s intention was to trigger spending, get more Australians into work and to boost wages.

His reassurances of ongoing low interest rates sparked a decades-high rate of property spending, with hundreds of thousands of properties changing hands and many locking themselves into three-year fixed-rate mortgages, with the expectation things wouldn’t be too different on the other side.

The cash rate now sits at 4.1 per cent, an increase of 400 points since May 2022.

Some homeowners are looking at a 63 per cent increase in their repayments as their fixed term comes to an end, with the RBA’s own estimates predicting half of all fixed-rate home loans will expire in 2023.

Dr Lowe apologised for misguiding Australians last year. Picture: NCA NewsWire / Martin Ollman

Earlier this year, Mr Albanese made a dig about Dr Lowe’s now-notorious statement.

When questioned on why the budget papers had predicted the cash rate would remain at 3.85 per cent just a month before the Reserve Bank hiked the rate to 4.1 per cent, Mr Albanese gave a lighthearted – if unprompted – gibe directed at Dr Lowe.

“That’s not the only prediction on interest rates that has not been correct. It’s not as incorrect as the ones saying there’d be no increases till 2024, so these things are all relative,” he said.

At a senate estimates hearing in November, Dr Lowe apologised for misguiding Australians.

“I‘m sorry that people listened to what we’ve said and acted on that and now find themselves in a position they don’t want to be in,” Dr Lowe said.

“But at the time, we thought it was the right thing to do. And I think looking back, I would have chosen different language.

“People did not hear the caveats in what we said. We didn’t get across the caveats clearly enough, and the community heard 2024. They didn’t hear the conditionality.

“That’s a failure on our part, we didn’t communicate the caveats clearly enough, and we’ve certainly learned from that.”