Australia’s treasurer announced that Michele Bullock will be the new Reserve Bank governor when incumbent Philip Lowe’s term expires in September, becoming the first woman to helm the nation’s central bank.
“Bullock is the right person to lead the RBA into the future and ensure we have the world’s best and most effective central bank,” Jim Chalmers told reporters in Canberra on Friday. Her seven-year term will begin on Sept. 18.
Bullock, 60, will confront a challenging combination of running policy at a time of elevated inflation and implementing a wide-ranging reform at the central bank. While she is well regarded, her experience has been less on the monetary policy side of the RBA prior to becoming deputy in April last year.
“The treasurer has made a first-rate appointment. I congratulate Michele on being appointed governor,” Lowe said in a statement. “The Reserve Bank is in very good hands as it deals with the current inflation challenge and implementing the recommendations of the review of the RBA.”
Bullock took on the No. 2 role just a month before the RBA began its most aggressive policy tightening cycle in more than 30 years. She has worked at the RBA since 1985, joining as an intern, and has a master’s degree from the London School of Economics.
Before becoming deputy governor, Bullock oversaw note issuance and payment settlements, fields she’s deeply interested in.
“Michele is absolutely outstanding, a very good leader,” said Jonathan Kearns, a former senior RBA official. “She is experienced in large parts of the bank. She is very good at picking things up quickly and drawing on the expertise of those around her.”
“It will be important to appoint a deputy governor quickly to replace Michele and ideally it should be someone who can complement her on the monetary policy side of things. Looking internally, Chris Kent will be the best candidate.”
A key impediment to Bullock taking the top job had been seen as her having been part of the old culture that Chalmers sought to change following a review of the bank. Some economists had argued that she or any other internal candidate wouldn’t be well placed to drive that reform.
Chalmers said Friday Bullock is committed to implementing the recommendations of the review.
Lowe’s removal has looked an increasing formality as Chalmers held off on an announcement until July, seeking to limit the time where there would be both an incumbent governor and a successor in the wings. His term ends Sept. 17.
It comes after an independent review of the RBA recommended major changes at the institution, including setting up a separate policy committee, fewer rate meetings and press conferences after each decision. That followed criticism of Lowe’s forward guidance during Covid and confusion over communications.
The RBA last week paused interest-rate increases for just the second time in a 15-month tightening cycle, during which it has lifted borrowing costs by 4 percentage points. The aggressive campaign to tackle inflation has drawn criticism from Australia’s highly-leveraged households and some lawmakers.
“I don’t think she will come in and be materially more hawkish or dovish than Governor Lowe. I think she will need to assess the economic conditions as they present themselves,” said Alex Joiner, chief economist at IFM Investors Ltd. “The challenge for the new governor is to implement the framework or the new framework of the RBA review.”
The Australian dollar was little changed at 68.87 US cents after the announcement, while bond yields held their earlier losses.
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Lowe, 61, was accused of letting inflation undershoot the RBA’s 2-3% target before Covid, then of leaving interest rates too low for too long during the pandemic, having guided that they were unlikely to rise before 2024.
Instead, inflation surged and the RBA began hiking in May 2022. Compounding that have been poor communications that left investors and traders confused over the bank’s reaction function and policy intentions.
The backlash intensified earlier this year following a media report that Lowe attended a closed-door briefing with rate traders on Feb. 9 — despite not having made a public appearance to explain a hawkish shift at a policy meeting two days earlier.
Lowe had “become a little bit more of a polarizing figure than previous central bank governors,” IFM’s Joiner said. “But really, I think he did a very good job through the pandemic, but obviously he has been cast in the media for defining forward guidance that obviously didn’t take place.”
(Adds statement from Governor Lowe, comment from economist.)
