Jim Chalmers: RBA review will ‘feed’ into leadership decisions as Phil Lowe faces backlash on rates

Reserve Bank Governor Philip Lowe’s job security is under a cloud, according to Australian Treasurer Jim Chalmers.

Reserve Bank Governor Philip Lowe’s job security is under a cloud, according to Australian Treasurer Jim Chalmers.

On Thursday, Treasurer Jim Chalmers said Dr Lowe’s term is due to expire next year, and a decision on whether he would get a second term would be made in September, as usual.

But Dr Chalmers conceded the findings of a wide-ranging review into the bank would play a crucial role in how the decision was made.

“After that (review) it would be strange, I think, not to factor in some of those conclusions in whatever we decide about the role of the Governor,” Dr Chalmers said on ABC Radio National Breakfast.

“I obviously have a really good working relationship with Governor Lowe and I respect his independence.”

Treasurer Jim Chalmers said the first-ever independent review of the Reserve Bank of Australia would “factor in” to decisions on leadership. Picture: NCA NewsWire / Damian Shaw

Dr Lowe’s seven-year term as the Reserve Bank of Australia’s governor is due to end in September next year.

Ahead of his contract ending however, a broad-based review of how the RBA sets monetary policy will be provided to the Treasurer in March.

Announced in July, Dr Chalmers said the review was to ensure Australia had the “world’s best and most effective central bank”.

He has repeatedly insisted the independent review was not a “performance review” of Dr Lowe, who has come under fire for his comments suggesting the central bank would not raise interest rates until 2024.

“It will obviously guide the kind of Reserve Bank that we want, and the personnel, the leadership of the Bank will clearly feed into those kinds of considerations,” Dr Chalmers said.

“There’s been a lot of interest in the composition of the board, the relevant expertise at the Bank, the inflation targeting regime, how they balance the various objectives of full employment, the inflation target and all the rest of it.”

Under Dr Lowe’s governance, the RBA has now handed down an eighth-straight rate hike, taking the cash rate to a level not seen in 10 years, in a bid to halt soaring inflation.

RBA Governor Philip Lowe said it was “regrettable” if Australian’s took out home loans based on his interest rate comments and were now feeling the pinch.

Last week, Dr Lowe apologised to Australians who may regret taking out a home loan off the back of his comments.

“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in,” he said.

“Looking back, we would have chosen different language. People did not hear the caveats. I thought it was clear … but the community didn’t think it was clear. Well, they thought it was clear we weren’t raising rates until 2024. That’s a failure on our part.”

On Thursday the review released 78 public submissions it had received and the RBA released information it had provided to the review, online.

It said key themes being examined by the review include; performance, leadership, accountability, monetary policy arrangements and communications.

Dr Chalmers said it was “heartening” to see strong interest and a broad range of views provided to the Reserve Bank review.

“We all have an interest in ensuring our monetary policy arrangements are the best they can be and that the right decisions are made,” he said.

“The variety of opinions and ideas put forward in these submissions will be critical to ensuring the Reserve Bank has the right objectives, policies, governance and culture into the future.”