For months, speculation has swirled about the appointment of a new governor of the Reserve Bank, a key position in the management of the Australian economy.
The present governor, Philip Lowe, has faced sharp criticism, especially over his prediction interest rates would be held steady until 2024, which proved wrong. It always seemed unlikely he would get another term.
Now the government has named his successor – the present deputy governor Michele Bullock. She will be the first woman to hold the position.
From the government’s point of view, it is a cautious appointment, signalling both continuity and change. Bullock is of the bank, but she will oversee the reforms that have come out of the review of its operations.
Treasurer Jim Chalmers joins the podcast to talk about the new governor.
TRANSCRIPT
E&OE TRANSCRIPT PODCAST INTERVIEW THE CONVERSATION FRIDAY, 14 JULY 2023
SUBJECTS: RBA Governor appointment, inflation, global economy, interest rates, cost-of-living relief, Fadden by-election.
MICHELLE GRATTAN, HOST: After months of speculation we have a new head of the Reserve Bank. Phil Lowe, who’s presided over a dozen rises in interest rates, will leave when his term ends in September. He’ll be replaced by his deputy Michele Bullock, who’s been with the bank nearly four decades. Michele Bullock becomes the first woman to head the bank in its history. Today, Treasurer Jim Chalmers joins us to talk about the new appointment. Jim Chalmers, thanks for talking with us so quickly after the announcement. Why have you chosen Michele Bullock?
JIM CHALMERS, TREASURER: Thanks for the chance to have another chat, Michelle. Michele Bullock is a terrific economist but also a really accomplished and respected leader. Her appointment really is the best combination of experience and expertise as well as a fresh leadership perspective at the bank. It’s also an historic appointment - the first woman ever to lead the Reserve Bank in its 63-year history. So Michele will become the ninth Governor of the Reserve Bank, and she will take up the role on the 18th of September and the Government is really proud to appoint her.
GRATTAN: So you’ve also got your top economic bureaucrats still in place. They were on the list, of course, but is this the best of all worlds?
CHALMERS: There was a lot of speculation about two of the really quite remarkable public servants of their generation, Steven Kennedy at Treasury and Jenny Wilkinson at Finance. I have a mountain of respect for both of them. And this is the best of all worlds: Michele Bullock is the best person to take the Reserve Bank forward into the future, and Steven Kennedy remains at Treasury and Jenny Wilkinson at Finance. And because we are entering another difficult period for our economy and for the global economy, I think it matters a great deal to have three people of their character and calibre in the three key positions, which will help the country most importantly, but also the Government navigate this global uncertainty that we are confronting right now.
GRATTAN: The new governor will be implementing the changes after the review of the bank but one observation of that review, one problem was groupthink there. Michele Bullock has been part of the group for nearly four decades. She’s a fresh face in the governor position but is she fresh enough?
CHALMERS: I think so. I mean, Michele Bullock will bring a fresh leadership perspective to the governorship of the Reserve Bank, but also and maybe this isn’t obvious to everyone but also Michele has played a really thoughtful and considerate and constructive role in the Reserve Bank Review itself. And as I’ve come to work with her and know her well, I’m really confident that one of the best things about this appointment is the way that her gravitas, her heft, her relationship with the board, her relationship with the broader economic community will help us bed down and implement the recommendations of that really important review. And that was a big part of our considerations in naming her today and asking the Cabinet to agree to her appointment.
GRATTAN: Do you expect that monetary policy will change much under her?
CHALMERS: I want to make this really clear, Michelle, I cherish the independence of the Reserve Bank and everything I’ve tried to do with this RBA Review and even this appointment is to invest in the independence of the bank rather than undermine it. And so this decision to appoint Michele Bullock is not about any one monetary policy decision or another. I still don’t pre-empt or second guess decisions taken independently by the Reserve Bank. They will make their decisions independently. The Government’s focused on our part of all of this, which is to take some of the edge off these cost-of-living pressures without adding to inflation, and that’s what our economic plan is all about.
GRATTAN: How do you think the overall operation of the bank will change in light of the review?
CHALMERS: I think one of the most thoughtful parts of the Reserve Bank Review which is a first-class document, and Renée Fry-McKibbin and Carolyn Wilkins and Gordon de Brouwer deserve the country’s thanks for the way that they tackled this review. It is, in my view, a very comprehensive and intelligent piece of work. And one of the big focuses is how do we make sure that we get the culture and the institution itself right so that it’s the world’s best central bank. And I think having a fresh leadership perspective there will be important. That’s not to in any way run down or diminish the really quite extraordinary contribution that Phil Lowe has made for more than four decades there. And I mean it when I say that Phil Lowe goes with the Government’s respect, the Government’s gratitude and also with dignity. He has carried himself impeccably throughout this. I speak with him frequently, I’ve known him a long time, and on a personal level, I have a lot of respect and regard for him. And so the bank will change when the leadership of the bank changes but I think more importantly than that, or in addition to that, at least it will change because of the work that we’ve put into it via the Reserve Bank Review to make sure that we get the best possible bank to confront the challenges of the future.
GRATTAN: Phil Lowe has copped an enormous amount of criticism over recent months as interest rates have risen. I can’t remember any previous governor being in the hot seat so much. Do you think the critics have been too hard on him?
CHALMERS: What I’ve tried to do when it comes to the criticism of decisions taken by the Reserve Bank is to make it clear that the Reserve Bank takes a decision about interest rates and then they defend that in the public realm, and that’s appropriate. No institution should be beyond criticism or beyond reproach, and that’s true of the Reserve Bank as well. And so where there is criticism, it should be respectfully levelled and it will be respectfully responded to. I think that’s a good model, and same for the government, frankly. I’ve got my own job, and I’m focused on doing it. We’ve done so much over the course of the last 14 months, I’ve got my job to do, they’ve got a job to do. I defend my decisions and actions and they defend theirs.
GRATTAN: Talking more broadly, the latest US inflation figure, which was out this week shows it down in that country to 3 per cent. The inflation problem is subsiding globally. What are the implications for Australia? I noticed the ANZ today said in a statement that it’s expecting an extended pause in rates.
CHALMERS: I was really encouraged by the inflation number in the US not because I think that the Americans are necessarily out of the woods, but because inflation is moderating there, as inflation is moderating here in Australia as well, and that’s a good thing. We’d like it to moderate quicker. Obviously, a lot of eyes are on the American economy, it has proven itself to be remarkably resilient and robust but there are still risks in the US. There are risks in China. Europe is in recession, the Kiwis are in recession and others. And so what the economists describe as risks being tilted to the downside really means that there’s still enough global uncertainty to trouble us, that we monitor very closely, because there will be implications for us. Our economy is slowing. There’s every chance it’s slowing considerably because of a combination of the global factors, but also those rate rises, which began before the election.
GRATTAN: So that makes for a longer-term pause?
CHALMERS: Well, again, I don’t want to pre-empt the decisions that the Reserve Bank board might take into the future but no doubt they will weigh all of that up, and they’ll come to their decision independently.
GRATTAN: You said in a speech this week that responsible economic management and compassion are complimentary, not in conflict. But interpretations of that speech differed. Some said you were saying you were open to more cost-of-living relief. Others said you were holding the line against that. Can you just clarify for us?
CHALMERS: The point that I was making was for too long - and this has been a frustration of mine - the commentary has made it sound like you can be responsible economic managers or you can help people through tough times. And what we’ve shown as a government, and we’re proud of this, we’ve been able to dramatically improve the budget position at the same time as we provide cost-of-living help. And so what we’re focused on is not new cost-of-living measures, but rolling out billions of dollars of cost-of-living help at the moment, whether it’s cheaper early childhood education, cheaper medicines, taking some of the edge off electricity bills, rent assistance, and the like. That’s our focus, rolling that out. But the point that I made, and the reason why there was that commentary, Michelle, in the aftermath of that speech is that if you have a budget in much better nick and you’re rolling out cost-of-living help, it actually provides a more solid foundation down the track if things deteriorate faster than you anticipated, to do more if you want to. But that’s not our focus. We’re not working up new cost-of-living measures. We’re rolling out what we’ve announced over the course of the last two budgets, but a much stronger budget makes us more resilient to some of these global uncertainties that we’ve been talking about.
GRATTAN: Just finally, you’re a Queenslander. What’s your prediction for tomorrow’s Fadden by-election?
CHALMERS: It’s going to be extraordinarily difficult. I don’t think anyone really expects, despite the fact that we’ve got a wonderful candidate in Letitia Del Fabbro, I don’t think anybody expects that seat to change hands and that’s because by-elections are good for oppositions rather than for governments. And that’s been a rock-solid blue ribbon, Liberal-LNP seat for I think all of my lifetime. And so we’ve got realistic expectations about it. I’ll be handing out how-to-vote cards with Letitia. I’ll be down there supporting a really wonderful local nurse but I think our expectations of Fadden are pretty well tempered.
GRATTAN: Jim Chalmers, thanks for talking with us today.
ENDS