Interest rate statements and hawkish meeting minutes aren’t the only bombshells this month! In case you missed it, the Australian government had also confirmed Glenn Stevens’ successor.
Say hello to Philip Lowe!
Two weeks ago Treasurer Scott Morrison announced that Deputy Governor Philip Lowe will replace Reserve Bank of Australia (RBA) Governor Glenn Stevens when the latter retires from his 10-year stint as the central bank’s head honcho. Lowe is the fourth consecutive Deputy Governor to replace his boss and is set to start his 7-year term on September 18.
So did Lowe win the position by default? Not necessarily. In fact, we’ve found at least three reasons to like Lowe for the top post:
1. He’s been with the RBA for more than half his life.
Literally. In 1980 when it was still cool to say “gnarly,” Lowe accepted an RBA scholarship to study at the University of NSW where he earned a first-class honors degree and a university medal.
Then, after rejoining the RBA in the mid-1980s, he was awarded a scholarship to the Massachusetts Institute of Technology (MIT) where economic hotshots like Paul Krugman were teaching.
The RBA certainly got its money’s worth! Lowe went on to head several RBA departments including Economic Research, Financial Stability, Domestic Markets, and Economic Analysis and even served as Deputy to Stevens in 2012.
More importantly, Lowe was around when the central bank dealt with Australia’s bank deregulation, floating of the dollar, the 2008 financial crisis, the peak of Australia’s terms of trade, and the mining boom and peak. Talk about experience!
2. He represents continuity and stability.
Save the volatility for the forex traders. With the time Lowe has spent as Deputy Governor, market players have long predicted (and cheered) his rise to the top. After all, they already sort of know that his temperament, biases, and his decision-making processes are mostly in line with the RBA’s current setup.
Let’s also note that it was Prime Minister Malcolm Turnbull, through Treasurer Scott Morrison, who appointed Lowe. This means that the current PM is willing to let the RBA do its thing and not punish anyone by sending a foreigner in *cough* Mark Carney in the BOE *cough*.
3. He knows what he’s talking about.
And he doesn’t shy away from the spotlight. He didn’t spend all that time in the MIT for nothing! Lowe has made waves with his papers and speeches including a then controversial one about the central bank’s role in controlling asset bubbles despite a low-inflation environment.
He also successfully jawboned the Aussie with a speech back in November 2014 and is recently pushing to increase awareness of the limits and mandates of central bank policies.
BONUS: He can do cool things as RBA Governor.
He can claim the term “LOWE interest rates” if he wants to. Also, anyone wanna suggest replacing the RBA’s ring tone with Flo Rida’s hit song Low?
Jokes aside though, the incoming RBA Governor has a few road bumps ahead of him. The Australian economy is working on rebalancing without the mining industry boom and with a relatively strong domestic currency. Wages are falling even as asset prices are rising and a low inflation is becoming a regular concern.
Meanwhile, the RBA itself is keeping up with the Kardashians… of the central banks. Pegging policies to inflation is in vogue and the RBA is forced to follow. Heck, the central bank recently cut its rates down to its record lows and rate cut junkies are expecting at least one more this year!
Thankfully, Philip Lowe has a couple more months to hit the ground running and he ain’t exactly the newest kid on the block. Now that he’s officially the next RBA Governor, we can pay more attention to the current Deputy’s comments for any clues on how he will handle the reins when he gets them.