Greens stance on RBA unfortunate, says Philip Lowe

Former Reserve Bank governor Philip Lowe is disappointed with a Greens’ proposal to undermine the central bank’s independence.

Treasurer Jim Chalmers and the government are rebuffing demands from The Greens regarding mooted reforms to the RBA. Picture: Glenn Campbell

Former Reserve Bank governor Philip Lowe has labelled the Greens’ proposal to undermine the central bank’s independence as “unfortunate”, stressing the RBA would continue to function well despite an impasse over reforms to its structure.

The Greens are withholding support for reforms to the RBA and demanding the bank cut interest rates immediately, or be forced to do so by Treasurer Jim Chalmers.

The government has resisted the demands causing a stalemate on the reforms. The mooted changes require legislation to be passed to introduce a dual-board system at the RBA reflecting one for rate setting, and the other for the day-to-day bank governance.

Dr Lowe was at a loss on Wednesday regarding the Greens’ position on reforms to the RBA and the demand for the bank to reduce rates.

“I don’t understand the idea that you would say we’ll pass your legislation if you force the Reserve Bank to cut interest rates,” he said. “I don’t understand the position so I can’t comment on what their strategy is.”

Former Reserve Bank governor Philip Lowe. Picture: Nikki Short

Dr Lowe said the RBA and the Productivity Commission had played a “key role” in the economy’s prosperity, underscoring why they needed to remain independent.

“People don’t like the decisions of the RBA sometimes and they don’t like the advice of the Productivity Commission sometimes, but we are better off for having strong credible public policy institutions that are prepared to speak their mind and be accountable to the public. Anything that undermines that, in the end, will make us poorer,’ he added.

“If the reforms don’t progress in terms of legislation … the RBA will be operating under the same legislation that it has been operating under since 1959. My humble opinion is that things have worked perfectly well since 1959.”

Dr Lowe’s comments follow those of other former RBA governors who have staunchly questioned the need for change to the central bank’s board.

Former RBA governor Bernie Fraser has described the reforms being touted as “bullshit” and nonsense, while his successor at the bank Ian Macfarlane, has argued the changes would undermine the governor’s role.

Dr Lowe and the Reserve Bank faced fierce criticism as the nation emerged from the depths of the Covid-19 pandemic, given he signalled rates were unlikely to rise for at least three years.