Philip Lowe the pilot has to land this plane safely, and soon

RBA governor Philip Lowe in Sydney on Thursday. Picture: NewsWire / Monique Harmer

Philip Lowe will never live down the botched “forward guidance” he provided last year on interest rates.

“It is still plausible that the first increase in the cash rate will not be before 2024,” the Reserve Bank governor said as late as November.

Lowe’s words have enormous power, but it doesn’t mean he’s infallible. The world’s monetary druids were caught out by inflation and are still chasing its long tail. Since May, we’ve seen the most aggressive tightening of monetary policy in a generation. Now the knives are out for the “soul-searching” Lowe and his colleagues.

You would not trust some of the RBA’s critics with a tin money box, given the last time they were in charge of a substantial sum it was rattling around in a plastic charity bucket. But the central bank’s performance is now under review from experts and while acknowledging mistakes and ensuing dark nights of the soul, Lowe is defending the institution.

In a speech on Thursday, he said the RBA “has plenty of company in not predicting this lift in inflation” and he had the graphs to support it. It’s a dismal fail, but a human one.

Let’s not forget, we need the RBA to win its fight against inflation with as little damage to the economy as possible. To do that, Lowe needs to get the big calls right in a very uncertain world, although that’s why he gets paid a million bucks a year: to land the plane on a jungle strip in the dark using faulty instruments and foggy glasses.

His deeper message may have been lost in the uproar of resignation talk, but it’s about the importance of “price stability” to Australia’s wellbeing. “High inflation is a scourge,” Lowe said. “It damages our standard of living, creates additional uncertainty for households and businesses, erodes the value of people’s savings, and adds to inequality.

“Without price stability, it is not possible to achieve a sustained period of low unemployment.”

Full employment can be locked in only through community effort, which means workers and their representatives not making outrageous wage claims; businesses investing profits in better machines and ideas and sharing the productivity spoils with their employees; and governments keeping spending and taxing in balance and backing in policies that aid economic dynamism.

Right now, a rattled RBA needs the air to settle and all the help it can get from others.

The world is a dangerous place for people at the controls – and their passengers.