Soap opera ends with right choice for RBA governor

In the absence of extending Philip Lowe’s term, appointing Michele Bullock as the next RBA governor is the optimum outcome as it provides monetary policy continuity.

The treasurer has made the right call. Michele Bullock is exactly the right person to succeed the departing Philip Lowe.

Both the departure of Lowe and the elevation of Bullock should have been entirely uncontroversial. Instead, Chalmers made an extended soap opera out of it.

There’s nothing unusual about Reserve Bank governors departing after their seven-year terms. That was the case with every governor before Lowe’s two predecessors.

And indeed, in the entire 60-year history of the RBA, every deputy has succeeded a departing incumbent, again with only two exceptions. One from a coalition government and one from a Labor government.

Anyone with an IQ greater than 80 would know this didn’t all happen on Thursday.

What, are we supposed to believe, as Chalmers was projecting, that the choice was still being mulled?

That extending Lowe was still an option? That Bullock hadn’t already been asked? That she hadn’t already accepted? That it all depended on cabinet ‘agreeing’ with the choice Friday morning?

As I wrote on Monday the die had well and truly been cast; the decisions were all locked in last week.

I wrote that the decision not to extend Lowe had been taken jointly by the PM and treasurer. Check.

The Prime Minister Anthony Albanese with Michele Bullock the next Reserve Bank of Australia Governor at Parliament House in Canberra. Picture: NCA NewsWire / Martin Ollman

I wrote that that decision and the identity of the new governor would be jointly announced by the PM and treasurer later this week. Check.

I wrote that I couldn’t say with equal certainty who it would be – but the raging favourite was finance department secretary Jenny Wilkinson. Wrong.

And without implying anything negative about Wilkinson, I’m glad I was wrong.

In the absence of extending Lowe – and I can fully understand and indeed accept why that was not done, although not agreeing with it – the critical continuity of appointing Bullock, albeit with inevitable change, was the optimum outcome.

Chalmers gets a tick for having the good sense to see that, if it took him some time to get there.

There are two big things that make continuity in setting monetary policy absolutely critical at this time.

The first is the matter of the RBA and especially what is its governor’s ‘day job’. Inflation.

As I wrote mid week we still have an inflation problem.

The US has got its inflation down to 3 per cent; we are still at – at least – 6 per cent.

The new governor – and policy board – are getting a somewhat tougher job. They will be mandated to, yes, get inflation down and keep it within the 2-3 per cent band.

But, while also trying to keep unemployment from rising, or rising ‘too much’.

Worse, what will already be a tough enough job, is not going to be helped by the reality, again as I wrote mid-week, the very same federal government has ‘joined’’ with the NSW government and the Fair Work Commission, to unleash a mini wages explosion.

The second factor, perhaps somewhat counter-intuitively, is the changes coming to the way the RBA works and in particular the role of the governor.

I suggest that change is best delivered by a willing insider: Bullock.

We will first see her in living action on the first Tuesday in October.

Originally published as Soap opera ends with right choice for RBA governor