Next RBA governor may be a non-Australian

It is becoming clear that Philip Lowe, a talented economist and a globally recognised central banker, will end his seven-year stint as RBA governor in mid-September. Picture: Bloomberg

Australian Treasurer Jim Chalmers has repeatedly avoided publicly endorsing the policy management of Reserve Bank of Australia governor Philip Lowe, signalling that change is coming at the top of the central bank.

Asked in a weekend television interview if Mr Lowe was doing his job well, Mr Chalmers said that Mr Lowe “has got to balance getting on top of the inflation challenge without crunching the economy”.

Earlier in the week, Mr Chalmers told reporters that “all options” are on the table about who might steer the central bank in the future.

It is becoming clear that Mr Lowe, a talented economist and a globally recognised central banker, will end his seven-year stint as RBA governor in mid-September.

This raises the question of who might replace him. Unfortunately, the answer is more complicated than it seems, given that there is no natural successor.

Central-bank insiders are usually preferred to an outsider. But that may be about to change.

For Mr Chalmers, who will make the decision, there is an opportunity to do something radical and new.

Treasurer Jim Chalmers. Picture: NCA NewsWire / Gary Ramage

The first name on many lists in banking and money-market circles is that of a non-Australian.

The spotlight is falling on Carolyn Wilkins, who is currently helping to conduct a government-ordered review of the RBA, which Mr Chalmers has said will “renovate” the central bank.

Ms Wilkins is qualified to lead a central bank, having had a lengthy career at the Bank of Canada, serving as its senior deputy governor from 2014 to 2020.

As a participant in the RBA review, Ms Wilkins would lead changes to the central bank’s operations, which are likely to include a new board structure and a modernisation of how it communicates.

Appointing an outsider would also address a key criticism that the RBA traditionally promotes from within, creating an atmosphere of groupthink that dulls the internal contest of policy ideas.

The review of the RBA will report at the end of March, giving Mr Chalmers time to consider the recommendations before responding about the time he needs to appoint the new governor.

The appointment of Ms Wilkins would be the biggest shake-up of the RBA’s culture in its history. She would also be the first woman ever to fill the role. The previous outsider to head the central bank was Bernie Fraser, who came to the job in the late 1980s from the Treasury Department.

Former RBA deputy governor Guy Debelle. Picture: Britta Campion

Mr Chalmers wants to be viewed as a reformer and an economic visionary, and appointing Ms Wilkins might tick those boxes politically.

Still, behind curtain two is an equally compelling candidate in the shape of former RBA deputy governor Guy Debelle.

Mr Debelle unexpectedly left the bank a year ago to pursue a position in the private sector. His return as governor would be widely applauded by traders, economists and academics.

It is understood that Mr Debelle is now again assessing his options for the future, having stepped back from his executive post with Fortescue Metals Group in November.

A veteran of the global financial crisis, Mr Debelle also helped craft the RBA’s extensive response to the Covid-19 pandemic, including quantitative easing and yield-curve control.

Mr Debelle has also championed issues around climate change, which may make him more attractive to the current centre-left Labor government.

But Mr Debelle may also be linked with criticisms of the RBA that make the case for Mr Lowe’s ouster.

Australia is facing its biggest inflation crisis in 32 years, and excessive monetary stimulus during the pandemic has been partly blamed for the problems.

Mr Chalmers will make a call in the months ahead on who will run the RBA next. Those two names at the top of many lists are compelling ones.

The Wall Street Journal