Tuesday 25th July 2023
Changes are afoot at the Reserve Bank of Australia (RBA) with the federal government appointing Michele Bullock as the RBA’s first female Governor.
The current RBA Deputy Governor has been tasked with implementing a raft of changes to the central bank’s operations which will be important to all brokers.
She will replace Dr Philip Lowe as Governor from September 18 this year, with the Government deciding not to extend Dr Lowe’s seven-year term.
Ms Bullock’s appointment – the first woman in the job since the central bank was established in 1959 – coincides with the RBA’s decision to accept key recommendations handed down in a Government-ordered independent review earlier this year.
From next year, the RBA board will only meet eight times a year to decide on interest rate settings, rather than the current 11. This will allow more time to assess the impact of any rate movements.
The board meetings will be much longer than they currently are and after each decision Ms Bullock will hold a news conference to explain why the board had made its ruling, in a move to provide greater transparency. The RBA’s framework will be reviewed every five years.
While she has worked for the RBA since 1985, Ms Bullock was only appointed to the RBA board in April last year, the month before the central bank started aggressively raising official interest rates in response to soaring inflation.
The RBA board has two more meetings under Dr Lowe’s governance before Ms Bullock takes over. Taming inflation will remain the focus of the RBA’s strategy, but many economists believe the cash rate may not go much higher than its current level of 4.1 per cent.
Although Dr Lowe has acknowledged that inflation in Australia is still too high, he has stated that it has passed its peak. Inflation is on the way down around the world with latest United States inflation figures showing it had fallen to just below 3.0 per cent, the lowest level since March, 2022.
With much of the RBA’s inflation fighting done, Ms Bullock will be looking at changing the way one of Australia’s most important financial institutions operates.
She takes over an organisation criticised in the independent review for being “insular” and vulnerable to “group think”, and for encouraging mortgage holders to believe it would not be increasing rates from the COVID-10 pandemic induced record low of 0.1 per cent until 2024 shortly before it began a series of 12 near-consecutive rate increases in May, 2022.
Despite having spent 38 years working for the RBA, Ms Bullock is not considered an insider because most of her time with the central bank was in areas separate from monetary policy.