Reserve Bank governor Philip Lowe has apologised to Australians who took out mortgages expecting interest rates to stay unchanged until 2024.
The Sydney Morning Herald reported that Lowe (pictured above), who was giving evidence to a Senate estimates committee for the first time, told the committee that the RBA had failed by not making clear that its commentary about steady interest rates was heavily conditional on the state of the economy.
“I’m sorry if people listened to what we’d said and acted on what we’d said and now regret what they’ve done. I’m sorry that happened,” he told the committee in Canberra on Monday. “I’m sorry that people listened to what we’d said and acted on that and now find themselves in a position they don’t want to be in. At the time we thought it was the right thing to do.”
The RBA governor has been heavily criticised by politicians and economists following the rapid increase in official interest rates since May this year. The OCR (official cash rate) has skyrocketed from 0.1% to 2.85% in just six months, with economists predicting another OCR rise when the reserve bank meets again on December 6.
Lowe said borrowers had clearly heard the Reserve Bank’s comments about 2024, but not that it could change depending on the economy’s health, the SMH reported.
“The country was in a dire situation and the Reserve Bank wanted to do everything we could to help the country get through that,” he said.
“We also thought, given the dire outlook, it was unlikely that inflation would pick up quickly and we would send a message that interest rates were going to stay low for a long period of time. At the time, I thought that was the right thing to do. Ex-post, the economy recovered much more quickly than anyone expected and we’ve had to raise interest rates more quickly and people who borrowed in those two years are now finding it much more difficult.”
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Lowe defended the bank’s actions and said when it made the commentary about 2024 there was fears of unemployment hitting 15% and a generation of Australians would be shut out of the jobs market.
