Philip Lowe backs RBA’s caution on rate cuts

Former Reserve Bank governor Philip Lowe has joined the chorus of voices warning that stubborn inflation could lead to interest rates staying higher for longer than many expect.

Speaking after his appointment as the next chair of philanthropic fund manager Future Generation Australia, Lowe echoed the cautious outlook on rate cuts from JPMorgan boss Jamie Dimon, who said borrowing costs in the US may need to stay high in the near term to keep inflation at bay.

“We’ve got to make sure that inflation is actually sustainably back to target, and we’re not there yet,” Lowe said at a press conference on Tuesday in Sydney.

Former RBA governor Philip Lowe will replace Mike Baird as chairman of the philanthropic Future Generation fund. Credit: Dominic Lorrimer

Lowe said he wasn’t going to offer advice to his successor Michele Bullock, but clearly saw his views as aligning with the caution shown by the RBA under her watch.

“The Reserve Bank, in its last commentary, reminded us that there was still two-way risk on interest rates and said it’s possible rates go up again … even though markets (are) pricing cuts,” he said.

Lowe, who left the RBA last year after seven years at the helm of the central bank, has joined the board of fund manager Future Generation Australia as an independent director, and will become its chairman in May. Former NSW premier Mike Baird, who has been the chairman since 2022, will remain on the board, but step down as chair to focus on his chairman role at Cricket Australia.

“I’ve had a relatively short time as chair, but it’s something that I’ve very determinately wanted to stay connected to,” Baird said. “When I was asked to play a role at Cricket Australia as the chair, I knew that commitments would be challenging, but I was determined to stay involved.”

Future Generation, which was founded by finance veteran Geoff Wilson, gives investors access to portfolios managed by a group of fund managers who are working pro bono and sacrifice any management fees – amounting to 1 per cent of its funds under management – to charities.

It has donated around $75 million to 10 children’s charities over the last decade, including Youth Off The Streets, the Australian Indigenous Education Foundation and the Lighthouse Foundation for homeless youth.

“I was immediately taken by the model because it brought together two of my great passions – finance and helping kids,” Lowe told reporters after his appointment.

He was cautious about whether he would seek other board roles, citing the bruising media scrutiny during his term as RBA governor, when interest rates soared soon after he said in late 2021 they would not rise until 2024.

“In terms of other offers, I’ve intentionally wanted to take some time out. I had a pretty torrid time, as you know, so I wanted to have time out with my family improving my golf handicap,” Lowe said.

“I thought very carefully about the first thing I want to do, and when the possibility of Future Gen came up, that ticked all the boxes for me,” he said.

“So whether there’s something else, I don’t know.”

Read more:

• Shane Wright: Reserve Bank revolution begins – but inflation remains its key issue
• Elizabeth Knight: New governor, same mission: RBA sticks with unpopular rate rises
• Ross Gittins: All the reasons interest rates are a bad way to manage the economy

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