Phil Lowe hagiography doesn’t change his screw up

One can always rely on the AFR to save the reputation of an oligarch. Within its mythos, those that handle money on a grand scale are Nietzschean ubermen, a preposterous notion that trashes accountability in our political economy. Chief Loon of the Reserve Bank of Australia, Phil Lowe, gets the airbrushing today from Pamela Williams:

Asked what he means by “a place we don’t want to be” – a nation looking down the barrel of tougher circumstances, or the RBA dealing with negative interest rate decisions – he replies: “More the latter – but it is not just negative interest rates. The other possibility is money creation by the RBA, with us buying assets from the private sector.”

Ian Saines has known Lowe since the 1980s and they share a friendship close enough for Saines to check with Lowe before speaking to this magazine. Chief executive of funds management at Challenger…“Phil won’t be shy about using his position in a much more robust way than his predecessors, to implement the objectives of the bank,” Saines says. “He is into plain speaking and I think he is breaking new ground on the role of the central bank. He is signalling what are the interests and purposes of the bank.”

…For some time, Lowe has been predicting years of low inflation ahead for Australia. In June 2018 – on a stage at the European Central Bank’s Sintra forum, and speaking on a panel with the chairman of the US Federal Reserve, Jerome Powell, ECB president Mario Draghi and governor of the Bank of Japan, Haruhiko Kuroda – Lowe talked about soft wages growth in Australia. He forecast weak inflation was here to stay “for some years”, noting major economies faced the same challenge.

Yes, well, the charts tell a different story:

Phil Lowe’s RBA was fantastically slow to embrace the reality of secular stagnation and lowflation in Australia. And since doing so he been fantastically obtuse in addressing it, oftentimes blaming workers for their own low pay packets. Crucially, Phil Lowe always takes care to robustly defend the mass immigration economic growth model that amounts to a permanent labour supply shock and is the real driver of lowflation in Australia.

To describe this as plain talking sure ain’t plain talking.

Phil Lowe’s RBA is radically conservative not radical and it should be getting a panning for taking so damn long to recognise the simply reality of the contemporary Australian economy.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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