Reserve Bank boss Philip Lowe has revealed he’s received “disturbing” letters from families buckling under financial strain, saying stories about the effects of rising rates leave him with a “heavy heart”.
Dr Lowe made the admission in parliamentary hearings on Wednesday, where he was grilled by senators about the $908 increase in typical monthly mortgage bills that the RBA has passed through since last May.
“A lot of people are writing to me at the moment telling me about their personal circumstances and it’s really really tough,” Dr Lowe said.
“I find it personally sort of disturbing … and people are really, really hurting – I understand that.
“But I also understand that if we don’t get on top of inflation, it means even higher interest rates and more unemployment.”
Inflation still ‘way too high’: Lowe
Despite this empathy, Dr Lowe was, at times, defiant during his first public appearance of 2023 on Wednesday when defending the hikes in interest rates the RBA board has approved in the past 10 months.
The governor has copped criticism from all quarters, most recently from former central bank boss Bernie Fraser, who said on Wednesday that the RBA’s foreshadowing of further rate hikes in 2023 was “unhelpful”.
For his part, Dr Lowe acknowledged public criticism was “noisy” but that the RBA’s job was to curb sky-high inflation by raising interest rates.
He said rates were now “clearly restrictive” – meaning they’re acting to reduce the pace of price increases – but inflation (which ended last year at 7.8 per cent) was still “way too high” and must be brought down.
In grim news for many mortgage-holders, Dr Lowe said he had an open mind about how many more rate rises were likely to be required to tame inflation.
“I don’t think we are at the peak yet,” he said.
Senators asked Dr Lowe if the RBA was trying to induce a recession, or whether he should resign after inflicting so much pain on families and making big forecasting errors.
Dr Lowe said he intended to serve out his seven-year term as governor and clarified that the central bank wasn’t trying to crash the Australian economy.
“We want to get inflation down because it’s dangerous,” Dr Lowe said.
“It’s corrosive, it hurts people, it damages income inequality, and if it stays high, it leads to higher interest rates.
“We want to get inflation down, but we also want to preserve the gains in employment that we’ve made.”
Lowe responds to bank lunch criticism
Dr Lowe also responded on Wednesday to criticism about a private lunch he attended with investment bankers last week after imposing the latest rates hike.
The RBA boss insisted there was “nothing untoward” about the lunch , but admitted he would “do things differently” if he “had his time again”.
The embattled Dr Lowe courted newfound controversy after it emerged he spoke at a private lunch hosted by investment bank Barrenjoey last week, in lieu of typical public remarks after the RBA’s February meeting.
Critics, pointing to a lift in bond yields amid the event last Wednesday, have argued the RBA governor’s private appearance was inappropriate.
But on Tuesday Dr Lowe hit back, telling senators at estimates hearings that he “can’t live in a bubble” and must “hear what financial markets have to say” about the Reserve Bank’s record-breaking rate increases.
He said his decision to attend a private event rather than make public comments to the media – as is customary following the RBA’s first board meeting of the year – was driven by feedback he was “talking too much”.
“Nothing untoward here,” Dr Lowe said.
Dr Lowe did acknowledge public anger about the appearance, saying he would “do things differently” if invited again and revealing the event had prompted the RBA to change its policies about the governor’s speeches.
He will no longer attend events or deliver speeches in the days between an RBA meeting and the publishing of updated RBA economic forecasts.
“I hear that many people have concerns about the timing, the timing between the Reserve Bank board meeting and the release of the statement of Monday on monetary policy, which is on Friday,’’ he said.
“We’re responding to that and we will no longer do those type of lunches before the release of the statement on monetary policy.”
In defending his decision, Dr Lowe said that any rise in bond yields last Wednesday had begun before he gave his speech, had continued after and was also evident in New Zealand’s markets.
Addressing the leak that led his appearance at the lunch to be reported in the media, Dr Lowe said he was not extended any privacy
“For many, many years, we’ve been able to have these and other meetings with the understanding of all participants that people in the meeting don’t run to the press straight afterwards,” he said.
“If you’re meeting with me, you want to have confidence that I’m not going to go to the press or tell other people what you’ve said and I expect the same.
“I expect the same courtesy and that’s what happens 99.9 per cent of the time. That did not happen [this time].”
