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  • Writer's picturePete Jonson

Henry Thornton, No. 74

Philip Lowe departs, but what is the aggregate effect?

Once again we report Paul Kelly's Wednesday.

'Where is the internal polical co-ordination, with in the Albenese government? Labor has just dispatched Philip Lowe as Reserve Bank governor but in his farewels Lowe has lobbed a series of policy time bo0ms in the landscape of the government.'

'If Labor fails as a governor the diagnosic by traced back to the warnings from the departing governor.'

'Lowe is a model of politeness but speaks with clarity - and that got him into trouble. In his departing event he rejected the personal dictum of famous US Federal Reserve chairman Alan Greenspan, who said: 'If I turn out to be particarly clear, you have probably misunderstood what I have said'.

Mr Lowe's perspective is 'kind of diametrically opposed'.

'His remarks have focussed on our great dilemma: how a flawed political system struggles to address Australia's economic challenges. In the process he offers critical insights into the structural issues that beset the Albanese government. The first is that the world has changed. For a government obsessed the cost of living, Lowe doesn't believe Australia or the world will return to the stable, lowe inflation. slight problem for Labor? No, big problem.'

'Pointing to the transformed world, Lowe documents the scale of transformation: 'the increased prevalence of supply shocks, deglobalisation, climate change, the energy transition, and shifts in demographics'.

Inflation 2-3 per cent will be fluctuations 'around that target'. In that inflation management in the bank will be an ongoing task.

"Lowe has a lot to say about fiscal policy - and he seems to distrust governments and politicians. ... He says a strong commitment to a fiscal framework 'would help'.

In my view, I suggest that current positions is Mr Lowe raising interest rates and the political players are spending lots of money. These different positions will be impossible and there will be crisis. Take for example massive inflows for new overseas people and the planned tiny numbers of new housing.

Mr Lowe could not say the problems but tries to lay out these ideas. In the final presentation: 'Here was a retiring governor delivering a warning about the threat to to living standards, listing the policies that are needed and declaring productivity gains existance virtually across across the public waterfront.

'Lowe did not say this - he couldn't- but while the politicians blamed Lowe for high interest rates, Lowe has finished by asking whether the politicians blamed Lowe for having the bottle needed the reforms Australia needs. ... Memo to Labor, lift your performance on economic reform and productivity.'

'Memo to Labor: the housing crisis demands strategic coordination actions by governments and act and authorities.'

Postcript: Lowe didn't send any memos to the government to the government. But he did say he wasn't Greenspan: that means you're supposed to understand what he said'.

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