Many thanks to Alexis Carey for including CIO Joshua Derrington’s recent comments in her article: “Damning poll reveals 77 per cent want RBA boss Philip Lowe to resign over interest rate fiasco“:
However, Josh Derrington, chief investment officer at Brisbane investment firm Alvia Asset Partners, said he didn’t believe Dr Lowe should resign just yet, but acknowledged his “poor communication skills” had left many Aussies in a “tight jam”.
“To then say you’re sorry if ‘people listened to what we’d said’ is only likely to further fan the flames of the anger of mortgage holders – many of whom are facing an uncertain festive season with few signs the economic pain is going to ease,” he said.
“However, while Lowe perhaps let himself down by communicating economic policy the way he has, it is easy to take pot shots with the benefit of hindsight.”
Mr Derrington said when the comments were made, it was an “uncertain time”, and Dr Lowe was “merely echoing the sentiment made by his counterparts in other parts of the world, like Canada, arising from concerns their credit growth was going to decline and the world was going to sleepwalk into a financial abyss”.
“Not only that, the RBA needed to consider not just the domestic economy, but the global economy as well, and so was mindful of global commentators and governors’ statements to ensure they were singing the same tune, or risk volatility or movements in the currency that would have gone against Australia’s interests,” he added.
“And then there is this concept of ‘jawboning’ which is effectively communicating in a way to encourage ‘animal spirits’ or behaviours, which can either encourage or discourage lending. It appeared that Lowe made the comments he did at that time to create certainty for a number of years so that people would still apply for loans or take on credit.
“The RBA was simply trying to reassure people who were not just concerned about interest rates, they were concerned about Covid and about economic activity. So he was responding to the data at the time, which was looking pretty grim.”
Mr Derrington said if Dr Lowe hadn’t responded to inflation when he did, “we’d be upset at him for different reasons”.
“Central banks have very limited tools with which to work with, with the bluntest tool being interest rates. Sadly it also has the biggest impact on society and people generally,” he said.
“So while his communication skills were lacking, I don’t feel this warrants Reserve Bank Governor Philip Lowe’s sacking (or forced resignation) and expect if confronted with the same situation today, he would react in much the same way, but would have likely communicated this approach to the Australian public very differently.”
“Damning poll reveals 77 per cent want RBA boss Philip Lowe to resign over interest rate fiasco“, Alexis Carey (news.com.au, Dec 2, 2022)
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