Reserve Bank governor Philip Lowe slammed after apology to mortgage holders over interest rates

Philip Lowe has been criticized by the Australian public after apologizing to mortgage holders for playing down interest rate hikes.

The Reserve Bank governor apologized to borrowers who expected interest rates to remain at a record low of 0.1 percent through 2024 based on RBA advice — only to endure seven monthly increases.

“I’m certainly sorry if people listened to what we said and then acted on what we said and now regret what they did,” he said Monday at the Senate Economy hearing.

“That’s unfortunate and I’m sorry that happened.”

But Dr Lowe’s apology failed to quell outrage as many Aussies struggling with the cost of living denounced the central bank boss on social media, saying his admission did nothing for those already feeling the financial pain of the rate hikes. wore.

“This apology is ridiculous. Even the Fed thought inflation was transient. And record-low rates would never last forever,” one person wrote on Twitter.

Reserve Bank Governor Philip Lowe has apologized to borrowers who have taken out mortgages expecting interest rates to remain at a record low of 0.1 percent.

Dr. Lowe repeatedly suggested last year that the spot rate would remain at 0.1 per cent ‘at the earliest’ until 2024, but borrowers have endured seven straight rate hikes since May (pictured is a house in Melbourne)

Another said: “Despite knowing how difficult people are, he will continue to raise rates because he is a one trick pony who has no other inflation strategy.”

“Man, I wish I could screw up that badly and still have a six-figure income with no repercussions,” a third added.

CHOICE journalist Jarni Blakkarly took a relentless swipe at Dr. Lowe’s by suggesting that he apologized publicly.

“I’m sorry that I can’t do my job and that you thought I could, and now there are no consequences for me, but a lot for you, because you listened to me. But I’m sorry if that helps,” he posted.

Many called on the Governor of the Reserve Bank to resign immediately.

“Fire him and fire the RBA that unfairly punishes only a certain section of society to solve their problems while the rest go free,” one of them tweeted.

‘So glad he’s sorry! Fortunately for him, there are no consequences for his mistake. If he had any decency, he would resign,” a second commented.

Another calling for his resignation said: “RBA Governor quote ‘I’m sorry if people listened to what we had said and then acted on what we said and now regret what they had done’.”

Australians denounced Dr Lowe on social media, with many calling for his immediate resignation

Dr. Lowe suggested Australians misunderstood the nuances of what he had said, arguing that his indication that interest rates would remain unchanged was “cautionary” based on low inflation in 2020 and 2021

Dr. Lowe repeatedly suggested last year that the spot rate would remain at 0.1 percent “at the earliest” until 2024, but since May, borrowers have endured seven straight monthly rate hikes to tackle the worst inflation in 32 years.

The seven consecutive fare increases are the fastest increases in Australian history.

Cash interest rates are now at a nine-year high of 2.85 percent and economists expect interest rates to rise another 0.25 percentage point in December.

Of those seven increases, four were 0.5 percent, marking the most severe monetary policy tightening since 1994.

A borrower with an average mortgage of $600,000 saw his monthly repayments skyrocket by $839 to $3,145 in just six months, as a typical variable interest rate for Commonwealth Bank home loans rose from 2.29 percent to 4.79 percent.

Despite the apology, Prime Minister Anthony Albanese assisted Dr Lowe

“People who borrowed in those two years are finding it much more difficult now,” Dr Lowe said.

“I’m sorry that people listened to what we said and acted on it and are now in a position they don’t want to be in, but at the time we thought it was the right thing to do.”

Dr. Lowe suggested that many Australians misunderstood the nuances of what he had said, arguing that his indication that interest rates would remain unchanged was “reserved” based on low inflation in 2020 and 2021 during the “difficult times” of the pandemic.

“In hindsight, we would have chosen a different language,” he said.

“People didn’t hear the caveats in what we said and my language was always reserved, but I thought it was clear from the central bank’s perspective, but the community — they thought it was clear that we didn’t get rates until ’24 increased.

“That’s a mistake on our part – we didn’t communicate the caveats clearly enough and we certainly learned from that.”

A borrower with an average mortgage of $600,000 saw his monthly repayments skyrocket by $839 to $3,145 in just six months, as a typical variable interest rate for Commonwealth Bank home loans rose to 4.79 percent (stock image)

Cash rates are now at a nine-year high of 2.85 percent, with economists expecting another 0.25 percentage point hike in December (stock image)

Despite the apology, Prime Minister Anthony Albanese assisted Dr Lowe.

“We have confidence in Dr. Lowe and his position as head of the Reserve Bank,” he said.

The inflation rate of 7.3 percent in the year to September was more than double the RBA target of 2 to 3 percent, which was expected to remain outside that range through 2025.

The Reserve Bank now expects headline inflation, already at its highest level since 1990, to reach a new 32-year high of 8 percent by the end of 2022 – something not expected in 2021.

“Given the gloomy outlook, inflation was unlikely to pick up quickly,” said Dr Lowe.

‘We wanted to send a signal that interest rates would remain low for a long time, and I thought that was the right choice at the time.’

Dr. Lowe said the RBA was unable to predict the supply constraints that have driven up inflation, from China’s coronavirus restrictions to higher crude oil prices.

“We didn’t predict Covid and we didn’t predict the Russian invasion of Ukraine,” he said.

Rising cost-of-living pressures saw retail sales fall 0.2 percent in October, the first drop in 2022, new data from the Australian Bureau of Statistics shows.

Due to high inflation, Australian workers are actually suffering from a reduction in real wages.

The wage price index in the year to September grew by 3.1 percent, a level that was less than half of the consumer price index of 7.3 percent over the same period.

Wages are nevertheless growing at their fastest pace since 2013, after retail minimum wage workers received a 5.2 percent wage increase and Dr. Lowe expects the broader wage level to hit 4 percent.

The Albanian Labor government also plans to enshrine multi-employer negotiations into law following a deal with crossbench independent Senator David Pocock (pictured, members of the Construction Forestry Mining Maritime and Energy Union protesting in Brisbane)

The Albanian Labor government also plans to enshrine multi-employer negotiations into law following a deal with Independent Senator David Pocock.

Employers’ groups and the opposition are concerned this will lead to 1970s-style strikes for better pay, following a resurgence of the sector-wide bargaining system that prevailed until former Labor Prime Minister Bob Hawke’s government struck deals with unions in 1983 to curb double-digit wage growth.

“Industrial relations issues can hurt the supply side of the economy, so there is less supply, and depending on the effects of the disputes on aggregate wage growth, they could also affect inflation outcomes,” Dr Lowe said.

“It would be good if wage growth remained consistent with inflation returning to target in a few years in a fairly painless way.”

Dr. Lowe is concerned about a potential wage-price spiral fueling inflation.

“I drew attention to the risk in the hope of avoiding it,” he said.

‘If things continue like this, we will be in the world of the 1970s and that turned out very badly. I don’t think we’ll get back to it.’