RBA governor Philip Lowe says he has ‘no intention of resigning’

The Reserve Bank governor knows there are calls for him to step down, but hopes to still be in the top job beyond September, when his seven-year term expires.

Reserve Bank governor Philip Lowe says he has “no intention of resigning” and “hopes” he will be reappointed to the top job when his seven-year term ends in September.

Dr Lowe has come under heavy criticism over recent months for the bank’s failure to predict this year’s surge in inflation, and for embarking on the most aggressive series of rate hikes in a generation after telling Australians for most of 2021 that rates would likely stay at virtually zero for years.

In response to a question about his future during a payments systems industry summit in Sydney on Wednesday morning, Dr Lowe said “certainly I know there have been calls for me to resign”.

But the governor was defiant.

“As I’ve said before, I have no intention of resigning. I have an important job to do, it’s a responsible job, and I intend to do it. We’ve got to get inflation down and that’s my focus. And I will keep doing that until at least mid-September next year.”

Dr Lowe said he “didn’t know” whether he would be back speaking at the conference in 12 months’ time, saying “that’s a matter for the government”.

“My term finishes in September next year, I’ve got an important job to do at least up until then and I intend to do it. Whether I can join you for a seventh time is not in my control. I hope so, but we’ll see.”

Reserve Bank governor Philip Lowe plans to stick around as long as he is needed, amid calls to quit. Picture: Christian Gilles/NCA NewsWire

The central bank has conceded that hiking rates from May despite saying through most of last year that the key cash rate target would stay at a record low of 0.1 per cent for years, had been seen by many in the public as a “broken promise”.

Dr Lowe has always insisted this “forward guidance” was never a pledge and was always contingent on – flawed – forecasts which predicted inflation would stay low for the foreseeable future, although he has conceded this could have been communicated better.

Dr Lowe recently apologised to those who made financial decisions based on rates staying at virtually zero until 2024, and who found themselves regretting those decisions.

Jim Chalmers will draw from the RBA review panel’s report in March when he makes a decision over whether to extend Dr Lowe’s seven-year term.

The treasurer has indicated he will make that decision mid-2023, and has not given any strong indication either way.

If Dr Chalmers decided new blood was necessary, Lowe would be the first governor since Bernie Fraser in 1996 to not get another three years.

Early indications are that the RBA review panel could recommend hiring more senior staff from outside the central bank, potentially paving the way for Dr Lowe to be replaced by an external candidate.

Dr Lowe’s comments came as figures released overnight showed further evidence that red hot inflation in the United States cooled for the second month in a row, falling to 7.1 per cent in November, from 7.7 per cent.

American inflation in the month was only 0.1 per cent – only a third of what economists had predicted, and the lowest result since August 2021.

Economists, however, continued to expect the US Federal Reserve would deliver a further 0.5 percentage point rate hike to 4.5 per cent at its meeting on Thursday morning, Australian time.

Dr Lowe has said he expects falling global commodity prices, a slowing global economy, and declining global transport costs will help ease inflationary pressures in 2023.

But with inflation still running at multi-decade highs across the developed world, central banks – including the RBA – have made it clear they will continue to tighten monetary policy.

Blerina Uruci, the chief US economist at funds management giant T. Rowe Price, said she expected the Fed to lift rates to 5 per cent.

“This is still not an environment where the Fed can declare victory on inflation, as most parameters are slowing from a very high level,” Ms Uruci said.

“But it will soon become possible for the Fed to pause interest rate increases and allow monetary policy lags to work,” she said.

“Interest rates are now restrictive, demand for labour is slowing, inflation appears to have peaked, and survey data point to a deceleration in growth in 2023,” she said.

On Thursday night, Australian time, the Bank of England and European Central Bank are expected to each lift their key cash rates by 0.5 percentage point to 3.5 per cent and 2.5 per cent, respectively.