For 90 minutes on Wednesday, Reserve Bank governor Philip Lowe faced questions from senators about his handling of interest rates and the direction of the economy.
It was the first of two appearances by Lowe, whose seven-year term as governor is due to end in September, in front of a parliamentary committee this week with a grilling from House MPs due on Friday.
Senators ranged their questions across various issues, including this from the Coalition’s finance spokeswoman Jane Hume who asked Lowe about the ability of the treasurer-of-the-day to overturn a Reserve Bank decision and what that might mean for economic policy.
The Reserve Bank is lifting interest rates to take inflation pressures out of the economy.
Central banks around the world work on the premise that higher interest rates will generally push up the unemployment rate, which in turn will reduce spending and inflation.
Here, Liberal senator Dean Smith asks Lowe what the bank’s actions will mean for the jobs market.
The Reserve Bank has lifted interest rates at its past nine board meetings, taking the cash rate from 0.1 per cent to 3.35 per cent.
On Wednesday, economists at TD Securities said they now believe the bank will have to take the cash rate to 4.35 per cent.
Lowe told the Senate committee that more rate rises were likely, even if that meant making the RBA less popular with Australians.
Greens senator Nick McKim used his time on the committee to outline the RBA’s perceived failings, suggesting the bank’s rate rises could lead to a recession.
Lowe made clear the difficult path the RBA was trying to follow, noting that did not include delivering a major economic downturn.
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