The fallout from Philip Lowe’s interest rate “apology” is growing, with the overwhelming majority of Aussies now calling for the RBA boss to face the music.
On Monday morning, Dr Lowe issued a stunning apology to Australians who took out a mortgage – during a period of record property prices, no less – based on the Reserve Bank’s repeated insistence that the official cash rate would not increase until 2024.
But instead, the RBA has announced seven aggressive, consecutive interest rate hikes since May this year, with Finder’s latest Cash Rate Survey revealing 88 per cent of experts expect it to rise yet again when the board meets on Tuesday next week, which would bring the cash rate to 3.10 per cent.
Speaking at a Senate estimates hearing, Dr Lowe said it was “regrettable” that Australians “listened to what we said” – leaving many gobsmacked.
“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in,” he said.
“Looking back, we would have chosen different language. People did not hear the caveats. I thought it was clear … but the community didn’t think it was clear. Well, they thought it was clear we weren’t raising rates until 2024. That’s a failure on our part.”
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A poll of nearly 13,000 news.com.au readers in the wake of Dr Lowe’s apology has since revealed a whopping 77 per cent believe he should resign as a result of the interest rate debacle.
Just 23 per cent said he should remain in the top job, believing he “did the best he could under tough conditions”.
Dr Lowe – who admitted earlier this year that he didn’t have a mortgage, and who rakes in a staggering base salary of $911,728 – also sparked an outpouring of comments from readers, with countless Australians expressing their fury along with heartbreaking examples of the all-too-real consequences of the RBA’s incorrect messaging.
“The RBA has robbed us of the chance to have a family. We could have afforded it six months ago. Now our two full-time incomes barely support us and the only debt we have is a home loan. And we can barely eat,” one reader wrote.
“Six months ago we were $1200 a month better off. Now our small amount of savings are covering the shortfall each month. Buying a house was a massive mistake. It’s false security. “Nothing but money pits that rob you of time, enjoyment in life, the chance to start a family. I wonder if Mr Lowe was ever forced to choose between a roof over his head and having a family.”
“I can still easily afford my mortgage, but I’m now burning money that I could have put in savings … I’m also allowed to be angry that I’m basically burning extra money I could be saving or using to pay off my mortgage faster,” another wrote.
“RESIGN NOW!!! You have no idea what your job entails, and YOUR JOB – is to guide brokers, parliament, banks and EVERY AUSTRALIAN – on how to manage their money – BECAUSE YOU CONTROL THE MONEY! GO! GET OUT! NOW!!” another shared.
Meanwhile, a number of prominent Australians have also called on Dr Lowe to step down, including United Australia Party politician Craig Kelly and Greens senator Nick
McKim, who told news.com.au the apology was too little, too late.
“While Dr Lowe has rightly apologised, it will take more than that to rebuild the trust and credibility the RBA has lost under his leadership,” Mr McKim said.
“There is no doubt that Dr Lowe has got to go. The RBA induced people to borrow record amounts of money in the belief that interest rates would not rise until 2024.
“We have now seen seven consecutive months of rate rises which have been crushing for mortgage holders, renters and small businesses. It is the people who can least afford it who have been hardest hit.”
Max Phelps, money coach and founder of finance business Golden Eggs, told news.com.au Dr Lowe should either pause further interest rate rises for the next three months, or resign.
“A year ago his reassurance that rates wouldn’t rise until 2024 was way off. After seven successive rate rises, he’s effectively admitting every month that the previous month’s rate rise wasn’t enough to do the job of reducing inflation,” he said.
“The latest inflation figures show a slight decline, but only reflect adjusted consumer spending for at most four out of the seven previous rate rises, due to the implementation and data lag.
“The November rate rise were reflected in bank systems by the end of November, which means the higher repayments won’t be deducted until December and leave people with less money to spend in January. The January data will be available at the end of February, just in time for the March RBA meeting.
“He should therefore wait three months to see the impact of all seven of the changes so far, or admit that the previous seven rises weren’t enough and resign, or be fired for incompetence.”
Mr Phelps added that if underlying inflation was still not trending rapidly downwards by March, then a considered increase could be made based on data, not a “gut feel that has proven to be wrong so many times”.
“Otherwise he’s got no idea what he’s talking about and will cause untold harm to millions of families and businesses,” he said.
However, Josh Derrington, chief investment officer at Brisbane investment firm Alvia Asset Partners, said he didn’t believe Dr Lowe should resign just yet, but acknowledged his “poor communication skills” had left many Aussies in a “tight jam”.
“To then to say you’re sorry if ‘people listened to what we’d said’ is only likely to further fan the flames of the anger of mortgage holders – many of whom are facing an uncertain festive season with few signs the economic pain is going to ease,” he said.
“However, while Lowe perhaps let himself down by communicating economic policy the way he has, it is easy to take pot shots with the benefit of hindsight.”
Mr Derrington said when the comments were made, it was an “uncertain time”, and Dr Lowe was “merely echoing the sentiment made by his counterparts in other parts of the world, like Canada, arising from concerns their credit growth was going to decline and the world was going to sleepwalk into a financial abyss”.
“Not only that, the RBA needed to consider not just the domestic economy, but the global economy as well, and so was mindful of global commentators and governors’ statements to ensure they were singing the same tune, or risk volatility or movements in the currency that would have gone against Australia’s interests,” he added.
“And then there is this concept of ‘jawboning’ which is effectively communicating in a way to encourage ‘animal spirits’ or behaviours, which can either encourage or discourage lending. It appeared that Lowe made the comments he did at that time to create certainty for a number of years so that people would still apply for loans or take on credit.
“The RBA was simply trying to reassure people who were not just concerned about interest rates, they were concerned about Covid and about economic activity. So he was responding to the data at the time, which was looking pretty grim.”
Mr Derrington said if Dr Lowe hadn’t responded to inflation when he did, “we’d be upset at him for different reasons”.
“Central banks have very limited tools with which to work with, with the bluntest tool being interest rates. Sadly it also has the biggest impact on society and people generally,” he said.
“So while his communication skills were lacking, I don’t feel this warrants Reserve Bank Governor Philip Lowe’s sacking (or forced resignation) and expect if confronted with the same situation today, he would react in much the same way, but would have likely communicated this approach to the Australian public very differently.”
Meanwhile, public relations expert Nicole Reaney told news.com.au Dr Lowe’s apology was cold comfort to those experiencing mortgage stress.
“When the announcement was made back in 2020 that rates would not rise, something like 300,000 Australians took out loans six or more times their incomes,” she said.
“Consumers made big personal decisions that affect their livelihood based on the information they received from the RBA.
“This is also coming off the back of very disruptive and uncertain times with the pandemic – consumers were counting on this assurance. This has a detrimental impact to Philip Lowe’s reputation.
“His apology only skimmed the surface in that it didn’t equate to the bearing these rises are having on the public. It didn’t offer any sincere empathy or even any avenues those in financial distress can explore.
“It just presented the error and left people to solely navigate their own financial futures.”