The new governor has been with the central bank since 1985.
(Photo: via REUTERS)
Bangkok In 2012, Michele Bullock answered the question of how long it would be before Australia would finally see a woman at the head of the central bank with a prognosis that was as dry as it was accurate: “Probably quite a while,” said the economist, who has spent her entire career in the Reserve Bank of Australia (RBA). More than a decade later, the wait is finally over – and Bullock himself is the one making history.
“Michele Bullock will be the first woman to ever head the Reserve Bank of this country,” said Australian Treasury Secretary Jim Chalmers on Friday, adding that “this appointment is historic.”
With the replacement of incumbent Philip Lowe, who headed the RBA for seven years and would have liked to remain in office, the government is not only concerned with gender equality: the bank’s interest rate policy was heavily criticized under Lowe.
Bullock, who most recently served as Lowe’s deputy, now faces the task of regaining lost confidence in the central bank and implementing a comprehensive reform process. She is the “best person to lead the bank into the future,” Chalmers said. Her appointment stands for an “optimal balance between extraordinary experience and a new leadership perspective”.
Public pressure on Prime Minister Anthony Albanese’s Labor government to replace central bank leadership has escalated in recent months. In particular, Lowe publicly declared in 2021 that interest rates would “very likely” remain at their historic lows until 2024, which caused displeasure. Instead, however, he initiated the turnaround in interest rates just one year later, which caused the interest rate to rise from almost zero to over four percent within a year.
Rising interest rates are hurting homeowners
Australians in particular, who bought property in the face of Lowe’s forecast of persistently low interest rates, felt duped by the central bank – and are now suffering the financial consequences. Because in Australia almost all mortgages have a variable interest rate.
The monthly installments for house and apartment owners are now significantly higher than they expected just a few years ago. The interest rate hikes, which are actually intended to fight inflation, are themselves a major driver of the cost of living in many households.
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Lowe apologized for his incorrect interest rate forecast, but caused outrage again in June with recommendations for those affected: “If people can limit their spending or find additional working hours, that would improve their cash flow again,” he said in a speech.
The statement has often been characterized as aloof and as advice that goes past the reality of many Australians. In newspaper comments, Lowe, who earns more than 600,000 euros a year and no longer has to pay off a mortgage himself, was asked to be content with the average Australian wage for six months in order to understand the problems of the citizens.
The new RBA boss Bullock is now supposed to help the central bank communicate better – as part of a deep restructuring that the government wants to enforce. A review of central bank practice commissioned by the government in April led to a list of 51 change requests that should result in better decision-making processes and more transparency, among other things.
Central bank should give external experts a stronger role
External experts should therefore play a more important role in monetary policy decisions. In addition, the central bank management is to explain its decisions to the public in future press conferences.
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Economists and analysts described Bullock, who has a master’s degree from the London School of Economics and has worked at the RBA since 1985, as a good choice for the post. However, economist Nicki Hutley, a representative of the Economic Society of Australia, warned that given the RBA’s problems it might have made sense to bring in an outside candidate to head the bank.
Bullock herself said in an initial statement that she was honored, but added, “It’s a challenging time to take on this role.”
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