RBA’s Lowe shares biggest regret of governor tenure

RBA governor Philip Lowe has shared his biggest regret as governor as he prepares to step down next month after seven years.

Speaking in the House economics committee last week, Lowe was asked about his seven years as governor and anything he regrets by Labor politician Jerome Laxale.

In response, he referenced the central bank’s handling of the COVID-19 pandemic in 2020. 

Measures taken included reducing interest rates to 0.1 per cent, a $100 million bond purchase program, providing a term funding facility to support business lending, providing liquidity to the financial system and government bond markets, and extending the government bond yield target.

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He replied: “Do I have any regrets? I wish I had understood the implications of the pandemic a bit more. The period in early 2020 was incredibly scary, and our mindset was to provide maximum support and maximum insurance to protect against the worst possible outcome. 

“We did that, and it turned out we provided too much support and perhaps too much insurance, and that’s contributed to the inflation problems now. We didn’t fully understand the nature of the pandemic, how long it would last and what the implications would be for the economy. So I wish, in retrospect, that we’d been able to understand that in more detail.”

If he had known that Australia would quickly get a vaccine and return to work as normal, Lowe said, he would have taken a different policy response. 

He has particularly been criticised by comments made at the time that interest rates would likely remain low until at least 2024, which turned out to be incorrect after the RBA started hiking them in May 2022. 

“I remember being told that the unemployment rate was going to be 15 per cent, the vaccine wouldn’t be for five years, maybe it wouldn’t be effective, and people could be forced to stay at home for years. It was incredibly scary, and we responded with maximum insurance. 

“It turned out that the scientists did a much better job than anyone thought, we recovered quickly, we all got vaccinated, the vaccine worked, and we’re back to pre-pandemic days. I wish I’d understood that. We would have had a different policy response. So that’s my biggest regret – that I didn’t understand that better.”

Prime Minister Anthony Albanese announced in June that Lowe’s governor position will be taken over by deputy governor, Michele Bullock.

She will be the first female governor of the RBA and will take up the role on 18 September with a new deputy governor to replace her being appointed in due course.