Michele Bullock’s run of good news may be about to end

Ronald MizenSenior reporter

When former Reserve Bank governor Philip Lowe fronted parliament and the media he spoke like what he is: an economist.

As Australia’s central bank embarked, under his leadership, on the fastest interest rate tightening cycle in a generation – taking the cash rate from 0.1 per cent in May 2022 to 4.35 per cent by November 2023 – Lowe regularly faced a barrage of questioning about the effects on ordinary Australians.

When asked about how households would manage the highest interest rate in 12 years, he said they could “cut back spending” or in some cases “find additional hours of work” to put themselves in a better financial position.

When asked about higher rents and house prices, the former banker said people might rent out their spare room, or kids might live with their parents longer.

To economists, these are perfectly sensible things to say. Higher interest rates are designed to make people spend less. Price signals such as higher rents are supposed to change people’s behaviour.

From an economic perspective, these are desirable outcomes to bring the economy back to balance. It does not mean, however, they are outcomes the Reserve Bank board would be popping champagne corks over.

Sadly, Lowe struggled with that nuance and the reaction was predictable. The then-governor was labelled “out of touch” and calls for his resignation grew. The fact Lowe indicated interest rates would not rise before 2024 made the whole situation all the more combustible. The media stoked the flames, and so did Prime Minister Anthony Albanese, who could not help taking a jibe.

Throw forward almost a year, and Martin Place has a new swath of media advisers loitering in the corridors and Lowe’s replacement, Michele Bullock, is going out of her way to avoid the same mistakes as her predecessor.

This was evident in her press conference on Tuesday after the board left the official interest rate on hold at 4.35 per cent for a fourth straight meeting – much to the relief of millions of mortgage holders.