- by Graham Holton
- The Guardian
- Issue #2057
Philip Lowe. Photo: Crawford Forum – flickr.com (CC BY 2.0)
According to its website, the Reserve Bank of Australia (RBA) determines the policy of the Central Bank and undertakes the actions necessary to ensure that monetary and banking policies are directed to “the greatest advantage of the people of Australia.” Its chief aims are: “the stability of the currency of Australia; the maintenance of full employment in Australia; and the economic prosperity and welfare of the people of Australia.”
There are nine members on the RBA Board. Its Chair, since 18th September 2016, is Dr Philip Lowe. The Deputy Chair is Michele Bullock, and the other members are Mark Barnaba, Ian Harper, Carolyn Hewson, Steven Kennedy, Iain Ross, Carol Schwartz and Alison Watkins. Eight of the nine Board members were appointed by the Coalition. The main restriction on being a board member is that board members can’t work for, or run, other banks.
Philip Lowe has a house in Sydney’s Randwick with no mortgage, a Commonwealth Bank credit card and three bank accounts.
In 1997 Lowe obtained a half-price home loan, subsidised by the Reserve Bank, to purchase his five-bedroom house. He took out two loans to purchase the $1,075,000 property, a $241,000 loan from the RBA and $151,000 from the Commonwealth Bank. The subsidised mortgage loan is not listed as a gift.
During the last financial year Dr Lowe’s total pay package was $1,037,709 making him one of the country’s highest paid public servants.
This raises the question, are Australian tax dollars being well spent on the RBA Board? By comparison, Lowe’s peers in the UK and the US do similar jobs for far less reward. In 2019, the annual salary for the US Federal Reserve Chair, Jerome Powell, was $301,931 in Australian dollars. The other “Fed” governors only get $272,000. In the UK, the Governor of the Bank of England, Andrew Bailey, takes home £500,000 (A$933,000) a year, comparable but still less than in Australia.
Another factor that might make us ask if we’re getting value for money from our Reserve Bank Board is its own financial performance. The independent review, Reserve Bank of Australia Annual Report (27th October 2022), shows Philip Lowe responsible for trading losses of up to AU$58 billion, as a result of the RBA’s bond purchase program and term funding facility. These losses have left the Reserve Bank technically insolvent. The Federal Treasurer halted all dividends to Australian tax payers until the Reserve Bank returned to positive equity, estimated to be in 2032.
In the foreword to the review, Dr Lowe writes: “The rise in bond yields that has accompanied the stronger economy and higher inflation has resulted in significant valuation losses on the Bank’s holdings of government bonds. As a result, the Bank has recorded an accounting loss of $36.7 billion this year, which has reduced its equity to negative $12.4 billion.”
On 6th June, the RBA announced its 12th consecutive interest rate rise, to 4.1 per cent. Dr Lowe was slammed for suggesting that Australians should cut back on spending to cope with rising interest rates. He is unaffected by mortgage rate increases.
He was criticised in April for not speaking at the National Press Club, following a meeting of the RBA board. Instead, he attended a private lunch hosted by investment bank Barrenjoey. Dr Lowe’s loyalty is clearly to the banking class, not Australia’s working families.
As families across Australia lose their houses, due to skyrocketing mortgages, and first home buyers increasingly fail to get into the housing market, it is legitimate to ask how this is to “the greatest advantage of the people of Australia?” The Board of the RBA has dismally failed to achieve its two basic aims: “the maintenance of full employment in Australia; and the economic prosperity and welfare of the people of Australia.” Interest rate hikes do not improve the interests and welfare of most Australians.
How can the RBA board get it so terribly wrong? One factor might be that the RBA Board’s salaries, like those of our MPs, are unaffected by the state of the Australian economy. Even if Australia is forced into a recession, they will not lose their salaries and generous perks. The RBA continually fails to meet its basic policy aim to protect the “welfare of the people of Australia.” The RBA Board has shown no empathy for the Australian people. Our reserve bank is not only technically insolvent, but morally bankrupt. It has declared a class war against the working class, with the landlord and banking classes being the clear victors.