{"id":11222,"date":"2022-12-01T11:15:47","date_gmt":"2022-12-01T00:15:47","guid":{"rendered":"https:\/\/www.oracleaccounting.com.au\/?p=11222"},"modified":"2022-12-01T11:11:08","modified_gmt":"2022-12-01T00:11:08","slug":"phillip-lowe-rba-chief-apologises-for-interest-rate-call","status":"publish","type":"post","link":"https:\/\/www.oracleaccounting.com.au\/phillip-lowe-rba-chief-apologises-for-interest-rate-call\/","title":{"rendered":"Phillip Lowe, RBA chief, apologises for interest rate call"},"content":{"rendered":"
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\"rba-chief-apologises-for-rate-call\"<\/p>\n

Reserve Bank governor Philip Lowe has apologised to Australians who may regret taking out a home loan off the back of guidance that interest rates would remain unchanged until 2024.<\/p>\n<\/div>\n

Appearing before a Senate estimates hearing on Monday morning, Dr Lowe said it was \u201cregrettable\u201d that the RBA did not make it clear the commentary was conditional on the state of the economy.<\/p>\n

\u201cI\u2019m sorry that people listened to what we said and then acted on that and now find themselves in a position they don\u2019t want to be in,\u201d he said.<\/p>\n

\u201cLooking back, we would have chosen different language. People did not hear the caveats. I thought it was clear \u2026 but the community didn\u2019t think it was clear. Well, they thought it was clear we weren\u2019t raising rates until 2024. That\u2019s a failure on our part.\u201d<\/p>\n

Dr Lowe has come under fire for saying, as late as November last year, that the bank was likely to hold the cash rate steady at record low rates.<\/p>\n

Since May, the cash rate has rapidly increased from 0.1 per cent to 2.85 per cent. Another rate rise is expected when the central bank\u2019s board meets next week.<\/p>\n

Following his apology, Prime Minister Anthony Albanese told reporters in Canberra he still had confidence in the RBA governor.<\/p>\n

During the hearing, Dr Lowe defended his actions, telling the committee that when he made the comments, the economy was facing \u201cdark times\u201d and inflation was unlikely to pick up quickly.<\/p>\n

He noted fears of unemployment hitting 15 per cent and \u201ca generation of young kids\u201d being locked out of the job market.<\/p>\n

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But the economy rebounded quicker than the RBA expected and Dr Lowe conceded the bank and the government had \u201cprobably over insured\u201d against Covid.<\/div>\n<\/div>\n

Since then, the lift in housing construction costs, petrol prices and Russia\u2019s invasion on Ukraine has contributed to inflation reaching a 32-year high of 7.3 per cent.<\/p>\n

Dr Lowe suggested inflation would decrease naturally over the next two years after peaking at 8 per cent later this year.<\/p>\n

The governor said while he wanted real wages to increase, he warned that if it were to occur now it would only fuel inflation and lead to higher interest rates.<\/p>\n

\u201cI understand this is a really hard message \u2026 inflation\u2019s 8 (per cent), wages, maybe 3 or 4 (per cent)\u201d he said.<\/p>\n

\u201cSo your real wage is actually declining this year and that\u2019s a hard message for everyone, but the alternative is even more difficult.\u201d<\/p>\n

Asked directly if he believed, as he has warned in the past, Australia could face a 1970s wage price spiral, should wages rise with inflation? Dr Lowe said he was simply drawing attention to the \u201crisk\u201d.<\/p>\n

\u201cI know it’s a very unpleasant message,\u201d he said.<\/p>\n

\u201cI am not concerned it\u2019s going to happen. We are not forecasting it\u2019s going to happen, but I am saying if it did, it would be difficult.\u201d<\/p>\n

Article Credited to Courtney Gould, news.com.au<\/em><\/p>\n

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