Reserve Bank war-gamed idea of governor Philip Lowe stepping down early

Reserve Bank officials tested the proposition that Philip Lowe could immediately step down following the release of Jim Chalmers’ report into the central bank.

Reserve Bank Governor Philip Lowe and deputy governor Michele Bullock appeared in from of two parliamentary commitee hearings in February amid rising discontent around surging interest rates. Picture: NCA NewsWire / Gary Ramage

Reserve Bank officials tested the proposition that governor Philip Lowe could immediately step down following the release of Jim Chalmers’ report into the central bank, papers released under Freedom of Information laws reveal.

The briefing documents include 82 questions to be war-gamed by Dr Lowe and deputy governor Michele Bullock ahead of what had been expected to be fraught parliamentary committee hearings on February 15 and 17.

The final mock question was addressed to Ms Bullock, and asked “there have been calls for the governor to resign by several public figures … what do you make of this?”

And: “If the governor does resign after the review, will you step in as governor?”

There is a broad expectation that the Treasurer will use the RBA review panel’s findings to justify not offering Dr Lowe an extension to his seven-year term when it ends in mid-September.

Dr Chalmers has said he will make a determination around Dr Lowe’s future by the middle of the year, and has said the central bank boss has his full confidence.

But the RBA’s briefing papers show the central bank canvassing the idea that the country’s top monetary policymaker could vacate the job in the wake of the public release of the RBA review panel‘s findings, which the government is aiming to publish before the May 9 budget.

There have been high profile demands for Dr Lowe to be sacked, including from the Greens, with a populist backlash against the soaring mortgage bills triggered by 10 consecutive interest rate hikes since May last year.

Dr Lowe has said the personal criticism directed at him was “unfair” given monetary policy decisions were taken collectively by the RBA’s nine-person board.

Asked at the senate estimates committee hearing on February 15 why he deserved to keep his job, Dr Lowe said “I have a seven-year term as the governor of the bank and I intend to serve out that term”.

“I think it would be a very bad outcome for the board to have to resign,” he said.

Dr Lowe has come under particularly heavy criticism for saying as recently as late 2022 that rates would not rise until 2024, only to hike by a record 10 straight meetings from May last year as inflation unexpectedly surged.

The central bank boss has apologised to Australians who mistook this monetary policy “guidance” as a promise, including those during the pandemic who borrowed right to their limits in the mistaken belief rates would remain at record lows for years.

The governor has also been pilloried for meeting with investment bankers privately in the days after the RBA board hiked rates to 3.35 per cent at its first meeting of the year on February 7.

The board has since lifted its cash rate target to 3.6 per cent, and there is growing uncertainty about whether there would be another hike next month in the wake of some high profile banking failures in the United States.