If it hadn’t, if Lowe’s term had been extended, it would have been a sign that the Government had confidence in the RBA Governor and the blame for the pain felt by Australia’s mortgage holders would have been theirs to deal with. No politician wants that.
Ultimately, Lowe went because he told Australia that interest rates would not rise until 2024, a bold claim for anyone to make and particularly so when Covid was throwing up so many surprises.
That meant people poured into the housing market on the back of cheap loans and an expectation that nothing would change for some time. Well, guess what? It did.
Someone had to pay for that and it wasn’t going to be the Government.
Lowe’s demise, therefore, was a product of his own recklessness. Adding to it was the RBA’s decision to refuse to accept what the bond market was screaming at it and that was for higher interest rates.
The bank, and Lowe, looked aloof, out of touch.
He could have found the cure to cancer after that and still would have lost his job at the RBA.
In the end, it was the public that lost faith in Lowe and that is a dangerous thing for any central bank. Once that happens people stop listening to the RBA and the Government.
Low will also have to wear some of the cost to the RBA which is about to undergo a major cultural change to make it more like the US Fed “with Australian characteristics’’, as Morgan’s economist Michael Knox characterised it.
Those changes should be good for it and for its relationship with Australians.
The problem for his replacement Michele Bullock is that she is an insider who has the task of reform.