The central bank’s high-stakes fight against inflation will come under the microscope at the outgoing governor’s last parliamentary hearing.
In what will be one of Philip Lowe’s last public appearances as head of the Reserve Bank of Australia, he will likley be quizzed on his performance in the top job over the past seven years.
Flanked by his deputy and incoming governor, Michele Bullock, along with other senior officials, Dr Lowe and his colleagues will be asked to spell out the likely trajectory for returning inflation to target without tanking the economy.
The RBA, which has been chasing down high inflation with a series of interest rate hikes, revealed a fresh set of economic forecasts last week.
The predictions were largely unchanged from three months ago aside from a more pronounced slowdown in growth in the next few years, and a slightly lengthened timeline to return inflation to the two to three per cent target range.
The central bank has previously made it clear it’s been willing to tolerate a slower return to target, now late 2025, than many of its global peers.
This should help most people stay in their jobs.
Whether or not four percentage points in interest rate hikes to date will be enough remains up in the air, although a second consecutive month on hold sparked hope the tightening cycle was over.
In both July and August, the RBA board opted to keep interest rates at 4.1 per cent.
Parliamentarians will also likely try and gauge the RBA’s tolerance for lingering inflation risks, such as the exceptionally strong jobs market and lacklustre productivity growth.
Committee chair Daniel Mulino said inflation was starting to grow more slowly but remained a key challenge.
“‘The committee takes its scrutiny of the RBA seriously and will continue to examine how the challenges of tackling high inflation are evolving – especially in light of the RBA’s mandate of returning inflation to the two to three per cent range over time,” he said.
The independent review into the Reserve Bank will probably also get some airtime.
A three-person review panel recommended a suite of reforms to bolster the central bank’s leadership and decision-making prowess, including a dual-board structure.
The RBA has already committed to several other recommendations, such as fewer meetings a year and press conferences after interest rate meetings.
© AAP 2023
