Reserve Bank Governor Philip Lowe has apologised to home borrowers caught out by the recent wave of rate rises after telling a Senate committee that his board had “failed” to communicate the conditionality of monetary policy forecasts it made up to November last year.
However, the mea culpa appears to have renewed negative public sentiment towards the governor after a raft of populist politicians and some economics commentators described his apology as unsatisfactory.
The public reaction on social media was probably captured by a Twitter user who posted that Lowe “put people at financial risk with a statement he did not need to make. He has to go”.
At the height of the pandemic in 2020 and 2021 the RBA was signalling that official interest rates were not likely to increase before 2024.
The RBA has raised the official cash rate at its last seven board meetings.
Prime Minister Anthony Albanese yesterday tried to douse the public ferment over Lowe’s tenure when he was asked by a journalist whether Lowe should resign.
“We have confidence in Dr Lowe and his position as the head of the Reserve Bank,” the prime minister said.
In an appearance before the Senate’s economics committee earlier in the day, Lowe conceded that he would have chosen different language to explain the central bank’s outlook statements on the likely direction of the cash rate.
"I'm sorry if people listened to what we'd said and acted on what we'd said and now regret what they've done - I'm sorry that happened," Lowe told the senate hearing.
"At the time we thought it was the right thing to do and I think, looking back, we would have chosen different language.
“People did not hear the caveats in what we said. We didn't get across the caveats clearly enough, and the community heard ‘2024’.
“They didn't hear the conditionality.
“That's a failure on our part, we didn't communicate the caveats clearly enough, and we've certainly learned from that."
While the cash rate stood at only ten basis points at the start of May, it soared to 2.85 per cent in early November.
Lowe’s apology followed the release earlier this month of an internal review of the bank’s rate guidance practices, which found the conditionality of rate outlook statements during the pandemic “were not sufficiently clear and not well understood”.
Since its May board meeting the RBA has reined in the time range of rate guidance from years to months.
Dr Lowe’s term as governor expires next September.