Australia’s government will not reappoint Philip Lowe as Reserve Bank governor, as widely anticipated, seeking a circuit-breaker as criticism of the central bank’s performance mounts.
Lowe, whose seven-year term expires on September 17, isn’t going to receive an extension, according to a person familiar with the matter. Lowe declined to comment when contacted by Bloomberg early Friday.
Treasurer Jim Chalmers is expected to announce his replacement on Friday following a meeting of the Cabinet, according to Australian Broadcasting Corp., which first reported the news. Chalmers and Prime Minister Anthony Albanese will hold a press conference at 9:40am.
The three contenders for the role most frequently mentioned are RBA Deputy Governor Michele Bullock, Treasury Secretary Steven Kennedy and Finance Department Secretary Jenny Wilkinson. The RBA has never had a female governor.
Lowe’s replacement has looked an increasing formality as Chalmers held off on an announcement until July, seeking to limit the time where there would be both an incumbent governor and a successor in the wings.
It comes after an independent review of the RBA recommended major changes at the institution, including setting up a separate policy committee, fewer rate meetings and press conferences after each decision. That followed criticism of Lowe’s forward guidance during Covid and confusion over communications.
Lowe and Chalmers are due to travel to India on Sunday for a Group of 20 meeting of finance ministers and central bank governors.
The governor, in what is likely to have been his last major speech in the role, was asked about his future in Brisbane on Wednesday. His response was simple.
“If I was asked to continue in the role, I would be honored to do that,” he said. “If I am not asked to continue in the role, I will do my best to support my successor.”
The RBA last week paused interest-rate increases for just the second time in a 15-month tightening cycle, during which it has lifted borrowing costs by 4 percentage points. The aggressive campaign to tackle inflation has drawn criticism from Australia’s highly-leveraged households and some lawmakers.
Lowe, 61, was accused of letting inflation undershoot the RBA’s 2-3% target before Covid, then of leaving interest rates too low for too long during the pandemic, having guided that they were unlikely to rise before 2024.
Instead, inflation surged and the RBA began hiking in May 2022, increasing rates by 4 percentage points in a little over a year. Compounding that have been poor communications that left investors and traders confused over the bank’s reaction function and policy intentions.
The backlash intensified earlier this year following a media report that Lowe attended a closed-door briefing with rate traders on Feb. 9 — despite not having made a public appearance to explain a hawkish shift at a policy meeting two days earlier.
Lowe had “become a little bit more of a polarizing figure than previous central bank governors,” said Alex Joiner, chief economist at IFM Investors Ltd. “But really, I think he did a very good job through the pandemic, but obviously he has been cast in the media for defining forward guidance that obviously didn’t take place.”
Lawmakers from the Greens Party had publicly called for Lowe to be dismissed.
(Updates with further details, comment from economist.)
