RBA boss Philip Lowe out of touch or teller of hard truths

RBA governor Philip Lowe. Picture: AAP

In what could be his last 10 months of his time in the top job, Reserve Bank boss Philip Lowe is setting himself up as an enthusiastic teller of inconvenient truths.

Lowe has received barely lukewarm support from his Treasurer amid the brickbats thrown at him over his misguided promise-not-promise last year to keep rates at zero until 2024, and Lowe would not fancy his chances for an extension to his seven-year term come September.

Copping a high-profile root-and-branch review into the central bank’s performance, governance and mandate would also not add to Lowe’s confidence about his job prospects. If Jim Chalmers decided new blood was necessary, Lowe would be the first governor since Bernie Fraser in 1996 to not get another three years.

With this context, it’s less surprising that the soft-spoken Lowe, over the course of an hour at a CEDA dinner in chilly Melbourne, dented or demolished a parade of Labor and union talking points.

The necessary shift to clean energy would come with higher power bills, exploding the dream of a costless transition. The government has to have a plan to get the budget back to balance, not least to give us the fiscal firepower to help households and businesses get through the next shock. Projecting a decade of deficits was not good enough.

And as the government pushes through the biggest workplace changes in decades, Lowe said that labour market flexibility was a key component of a successful modern economy in an increasingly dangerous world.

Most inflammatory, Australians had to cop falling real wages for a period as the price for keeping low unemployment, Lowe said. Chasing abnormal pay rises to keep pace with 30-year highs in inflation was a recipe for a 1970s-style wage price spiral, accompanied by recession, he said.

NDIS Minister Bill Shorten promptly described Lowe’s comments as “rubbish”, and painted him as an out-of-touch millionaire lecturing battlers on why their living standards have to fall for the common good.

That argument has potency and is likely to get cut-through with the public. And Lowe is not above criticism by any means.

But it’s a bad look for politicians to be seen denigrating the central bank, which is in the middle of the fight of its life to prevent the “scourge” of inflation undoing all the economic gains in the wake of the pandemic. That’s another inconvenient truth those in Canberra need to hear.