It’s time to be afraid, really afraid as RBA boss decision looms

Who do you really want running the RBA, making tough interest rate decisions – an independent governor and board or a treasurer focused on the ‘soft option’?

OK. So some – maybe even many – of you are pissed off at Reserve Bank governor Philip Lowe for reasons that are, in the words of the song, not exactly clear.

I could certainly understand why depositors might be unhappy with his seven-year period as governor. They’ve earned something close to exactly squat on their money.

But borrowers? Especially home loan borrowers?

Give me – and more importantly, him – a break.

He gave you three years of low interest rates – and the ability to actually borrow enough to buy your first home – running into Covid. And for existing home-owners, massive tax-free capital gains.

And then he gave all borrowers two years of effectively free money through Covid. So, he started raising rates in 2022 and not 18 months later at the start of 2024, breaking his ‘promise’-- which is in quotation marks because it was never a promise, just a stated expectation.

As I noted all through, if push came to shove, he would ‘do his duty’ and raise rates if that needed to be done.

It was. And he did.

Any borrowers out there need to ask themselves two very simple questions.

Would they have ‘preferred’ Lowe keep his ‘promise’ and not hiked until January 2024, and then would have hiked by, say 6 or even 7 per cent, in one go, to catch up?

And indeed, have to hike by more than he’s actually done, because he would have let inflation really run away?

Second question: would they have preferred he not cut rates to zero in the first place, so that halfway through 2024 they were not only still renting, but chasing homes at auctions at ever-escalating prices?

RBA Governor Philip Lowe. Picture: NCA NewsWire / Martin Ollman

Now, there’s a lot of history in those questions. But they also point to a serious – and disturbing - future.

We now have a trainee treasurer, with a rather exaggerated belief in his destiny – true, maybe not all that unrealistic, given who’s currently occupying The Lodge, on the odd days he is in Australia – who will appoint Lowe’s successor.

The said treasurer Chalmers said Thursday he’d tell us in July.

Thanks Jim for taking us into your confidence. Although I have to add, I have something less than confidence in either your approach to the choice or indeed the likely choice.

Let me now tell you, though, whether or not you are pissed with Lowe; be afraid, be seriously afraid.

These are dangerous days for the RBA and that means dangerous days – hopefully, not lengthening into years – for all 26m Australians.

Again, it comes down to a simple question: who do you really want running the RBA, making those interest rate decisions?

An independent governor and an independent board – specifically, in my judgment, not a board of so-called experts?

Or a treasurer or treasurer’s poodle, focused on the ‘soft option’, squibbing exactly the sort of tough decisions that Lowe & Co have made over the last year?

And that’s treasurers, entirely bi-partisanly, of both parties.

The country needs Lowe to be extended for these next all-important three years.

I fear, and you should too, as it’s not going to happen.

Originally published as It’s time to be afraid, really afraid as RBA boss decision looms