RBA governor announcement expected in July

Federal Treasurer Jim Chalmers MP has revealed that he expects to have an announcement on who will lead the central bank from September by next month.

Speaking to journalists in a range of interviews on Thursday (22 June), Mr Chalmers said he intends to “come to a concluded view on the RBA governor and announce that in July”.

The current governor of the Reserve Bank of Australia (RBA), Philip Lowe, will conclude his term at the helm in September.

At a doorstop interview in Canberra, Mr Chalmers said: “We’ve said for some time that we’ll consider that appointment around the middle of the year, it’s now around the middle of the year. I’m in the process of consulting with my cabinet colleagues and with others.

“This is a big job and so it’s a big call. And so, we’ll work through it in the usual methodical and considered way. My intention is to come to a view in the coming weeks, ideally to announce the outcome of that in July, but certainly before the Parliament returns.”

He later told the ABC that the Reserve Bank governor needs to be “well placed to implement the recommendations of the [RBA] review and to take the Reserve Bank into the future”.

“There are all of the usual considerations in that — a person of credibility, a person with experience, and a person able to take the Reserve Bank forward. It’s a key institution and obviously makes decisions which matter a great deal to the living standards of the Australian people and that’s why we don’t take decisions like this lightly,” Mr Chalmers said.

“I have very high regard for Phil Lowe. And he’s got a difficult job to do and he’s doing it … no matter who [is] the governor or what the decision [is], there’s an important role for the Reserve Bank, governor, and board to explain the decisions that they take.”

While Mr Lowe has previously suggested that he would consider taking up an additional three-year term as governor if he were asked, it won’t be without controversy. Mr Lowe has received widespread criticism after stating in 2021 that the central bank would not increase interest rates (from the record-low level of 0.10 per cent) until 2024 but then proceeding to hike the cash rate in May 2022 to fight runaway inflation.

It has now risen by 400 bps in 13 months (with many expecting more hikes to follow in the coming months), leading many borrowers to feel the pinch.

While Mr Lowe has apologised to borrowers who “acted on what we’d said and now regret what they had done”, he has also defended the RBA’s forecasting.

Speaking in April, Mr Lowe stated: “It is a great honour and it is a great privilege to have the job that I have and I would also say it is a great responsibility.

“It is entirely up to the government whether I continue to serve in this role after September.

“If I was asked to continue, I would. If I’m not asked to continue I will find another way to contribute to Australian society.”

RBA shake-up

The central bank is set to undergo a shake-up, after the federal government accepted, in principle, all 51 recommendations of the wide-ranging review into the Reserve Bank (RBA), An RBA fit for the future.

It will result in one of the largest shake-ups in its 63-year history, including by creating two RBA boards — one to set the cash rate and another for governance — and to potentially reduce the cash rate decisions from 11 rate calls to eight.

The three reviewers were critical of the current board structure, stating: “Currently, the Reserve Bank Board provides only limited challenge to the RBA executive’s view and its skill set is not matched to the complex and uncertain economic environment in which monetary policy will increasingly operate. The external members of the board have been outstanding leaders in their fields. However, collectively they have less economic and financial market expertise and spend less time on monetary policy than decision-making bodies at comparable central banks.

“Monetary policy involves making technical judgements and important trade-offs in an uncertain environment. Combining the judgement of a group of people with deep and relevant expertise provides the best chance of achieving good outcomes. The review seeks to raise the collective economic and financial expertise of monetary policy decision-makers while recognising the importance of retaining diverse perspectives and knowledge.”

[Related: ‘We will renovate the Reserve Bank’: Chalmers]