Economists back decision to appoint Michele Bullock as Reserve Bank governor

Economists are backing Michele Bullock as the RBA’s new boss as struggling households hope for a cost of living reprieve.

Australia’s top economist say Michele Bullock was the pick of the bunch to replace Philip Lowe as governor of the Reserve Bank, with her experience also well suited to implementing institutional reform.

Economists expect that Ms Bullock’s promotion from deputy governor to the central bank’s top job from September 18 is also unlikely to have any impact on the outlook for interest rates with the end in sight as some expect her first big decision will be when to cut rates.

The Federal government on Friday announced it would not renew Dr Lowe’s tenure as the RBA governor after serving in the role since September 2016 and instead opt for his deputy of a little more than a year.

Westpac chief economist Bill Evans told The Weekend Australia the country’s first female governor had a strong track record and had been impressive in her short time as deputy governor since being appointed in April 2022.

“We’ve been impressed by the work she has done and her speeches have been very good, especially her most recent one where she was prepared to take the flack that a lot of others hadn’t been prepared to do by saying that unemployment would need to be 4.5 per cent — 1 per cent higher from now — to beat inflation,” Mr Evans said.

“I thought that was an indicator that we can see a well-thought out governor.”

After a review of the central bank’s performance and mission in April called for the biggest organisational shake-up in 40 years, outgoing governor Dr Lowe outlined the RBA’s initial response on Wednesday, including the adoption of fewer board meetings, longer policy deliberations and better public communication.

The Prime Minister, Anthony Albanese and Treasurer, Jim Chalmers with Michele Bullock the next RBA boss at Parliament House on Friday. Picture: NCA NewsWire / Martin Ollman

Mr Evans said that Ms Bullock’s strong record in management, having been in a number of managing roles within the RBA including as head of the payments, meant she was equipped to oversee a raft of changes stemming from the review.

“Having seen Lowe’s speech this week where talked about all the changes that have been decided, means that an insider appointment will have the backing and confidence of the staff at the bank to implement that,” he said.

“The bank has seen a lot of criticism of late, but now is the time to get behind the new governor as they have a plan from the review and Michele is well placed to oversee that.”

NAB chief economist Ivan Colhoun said Ms Bullock is likely to bee seen as more practical and less theoretical than her predecessor Dr Lowe.

“As a very level-headed individual, she seems well suited to implement many of the recommendations for cultural change at the RBA,” he said.

“Her recent career in the RBA has been outside of the normal policy departments that recent Governors. Given this background, she may well be more attuned to risks in the household sector from the sharp rise in interest rates seen in this cycle.”

Veteran AMP chief economist Shane Oliver said the decision by Labor to opt for Ms Bullock would be welcomed by markets compared to those sprouted for the job including Treasury secretary Steven Kennedy and Department of Finance secretary Jenny Wilkinson.

“Michele was the best choice of the candidates having been at the RBA for a long time and sat around on the board making key decisions, as well as having excellent credibility and understanding f monetary policy and the economy,” he said.

“The challenge with bringing an outsider in is that they would have had to go through a settling in period while Michele can jump straight into it at arguably a big time,” he said.

AMP chief economist Shane Oliver says Bullock was the best of the candidates gunning to replace Lowe. Picture: supplied

While Dr Oliver saw a strong case in renewing Dr Lowe’s term as governor for a further three years, he said that his departure was unlikely to see him be a lame duck at his final two meetings.

“Lowe and the RBA board will still do what it feels like it needs to do and it might lifts rates sooner than later to give a clean slate to the new governor,” he said.

“Michele might come into the role at an ideal time where rates have peaked and I suspect her first major decision will be when to lower rates – likely not until next year.”

Mr Evans said there was still some fine tuning to do by the RBA, but that the peak of interest rates was close with change in leadership not likely to alter the timeline. His most recent forecast was for a peak of 4.6 per cent.

UBS chief economist George Tharenou said it expected the RBA to hike by a further 25 basis points, likely in August, adding that the verdict was still as whether Ms Bullock was dovish or hawkish.

“The change of RBA governor is not material enough to change our near-term cash rate forecasts,” he said.

“UBS think Bullock, is at the margin on the dovish side. This is based on Bullock’s most recent speech. Bullock already shifted the balance of the RBA’s dual mandate, which includes full employment.”