Regrets, Lowe’s had a few... now for improving his golf handicap

Phillip Lowe from 2016 to 2023 as RBA Governor.

Federal MPs took turns to praise Philip Lowe, but the Reserve Bank governor cleverly buried them.

Lowe’s last stand in Canberra on Friday was mostly a business as usual appearance before the House of Representatives economics committee, running through the central bank’s current thinking about the state of play and outlook for monetary policy.

He spoke about the corrosive effects of high inflation, urged savers to shop around for the best interest rates to stir competition in banking, warned of the persistence of services inflation and showed confidence that the nation was still on a narrow path to beat inflation and avoid a recession.

Lowe pushed back against union claims that banks were gouging their customers and said record profits were in line with the 15-16 per cent return on capital listed companies were achieving across the economy.

The outgoing RBA chief has been coming to these parliamentary inquisitions for two decades, as he rose through the ranks to the top job, and he knows the terrain better than anyone in the room. Or on the Zoom.

Mr Lowe at a Business Growth Fund Roundtable.

Much of the customary frisson, such as it is, between the monetary druids and politicians on the make, has been lost in the era of logging in remotely.

Nevertheless, each of the committee members effusively conveyed their gratitude to Lowe for his four decades of public service.

But Lowe, whose term ends next month, did not dwell on these encomiums.

Rather he spoke about his pride in the bank’s staff, who are pressing for a better pay deal through their union, and called on the political class to lift their game.

Notably, he returned to his valedictory theme of recent months: reviving productivity growth.

There has been no lift in output per hour worked since late 2019.

“That’s a problem”, Lowe deadpanned.

It means we have lower economic growth, weaker gains in asset values and real wages, and a “smaller pie” to sustain the government services Australians value.

“It’s the No. 1 medium term economic issue,” he said of stagnant productivity growth.

The RBA governor said there is no shortage of good ideas in this contested space: improving education, capitalising on the digital economy and enhancing competition through better land zoning and occupational licensing.

He reminded members of the Productivity Commission’s blockbuster five-yearly review, with 71 reform options, and that international bodies keep telling us to fix our tax system.

What’s lacking is the “political consensus” to get these productivity-enhancing policies through parliament.

As Lowe told G20 finance ministers and central bank peers last month, the challenge is getting the good ideas through the political process.

Raising productivity growth “should be the issue that dominates economic discussion” in this country.

Another area that would improve the quality of life for Australians is by building more homes.

Here, too, our federal, state and local representatives were offering up sub-optimal, short-term solutions, such as grants that only pushed up prices and the Greens’ calls for rent controls that would lead to fewer homes being built.

Again, it was up to governments to change the investment equation, improve zoning and reduce the cost of the land component in housing.

Regrets, Lowe’s had a few he told the committee.

“I wish I had understood the impact of the pandemic a bit more,” he said, adding that the “insurance” of near-zero interest rates for a long period through the Covid era was one of the reasons behind the inflation surge.

As the hearing wound down, Lowe vowed not to be a public commentator, but would aim to be a quiet middle-aged golfer working to get his handicap into single digits.

Another narrow path to be sure.