INTEREST RATES:

As some federal politicians call for his resignation in the face of a succession of interest rate rises, the Governor of the Reserve Bank of Australia, Philip Lowe, has defended himself and the bank against claims they have bungled the key role they play in the management of the national economy. The Bug flew to Sydney for this exclusive interview in Mr Lowe’s office in the RBA building in which he defended himself, the bank, its directors, and their reputations.

The Bug: Thanks for your time today. The RBA under your stewardship has imposed five interest rate rises in five months. This week you lifted the cash rate again by 50 basis points. What do you…..

PL: Hang on. Let me stop you there. You need to get your facts straight. We raised the cash rate yesterday by half-a-percent not 50 basis points. Big difference.

The Bug: No. They’re exactly the same thing.

PL: You sure?

The Bug: Yes.

PL: Oh, carry on then.

The Bug: This latest rise means anyone with a pretty average mortgage of $750,000 has seen their monthly repayment jump by more than $900. You famously, or infamously, led  Australians to believe in 2020 that the RBA would likely keep rates where they were until 2024, or even drop them.

PL: I apologised for that.

The Bug: Yes, you did, but do you understand public and political concerns about you and the RBA’s competence?

PL: Look, all I can say is that we take our job as RBA directors very seriously. We recognise we have our hands on the levers that can directly affect Australia’s economic performance and by extension the financial position of Australian business operators and households, especially homebuyers.

The Bug: But when you say “levers”, how many levers do you have.

PL: Well, there’s just one – interest rates.

The Bug: Which reminds me, we’re doing this interview in the Reserve Bank headquarters in Martin Place in the Sydney CBD. It’s a 20-storey building. If pretty much all you do is decide once a month on whether interest rates go up or down, what’s going on in the rest of this big building?

PL: That’s a very good question.

The Bug: Do you have a very good answer?

PL: No.

The Bug: So each month you and your fellow directors sit around the RBA board room table and thrash out a decision to lift or lower the cash rate?

PL: We do more than that. We use a dart to make the final decision just to take any human sentiment out of the process which may influence what should be a decision based purely on economic and financial criteria.

The Bug: It’s not very scientific, is it?  

PL: No, I disagree. Let me make three points about that. One – did you do maths at high school?

The Bug: Yep, I did.

PL: Well you would have learnt about portability.

The Bug: Portability?

PL: Yes, the relative frequency of any given mathematical outcome.

The Bug: You mean probability.

PL: Shit. Yes, that’s the word. Sorry, probability. Yes, when you bet on any outcome there’s usually a calcification you can do …..

The Bug: Calculation.

PL: Thanks.There’s usually a calculation you can do to determine the probability of that outcome occurring.

The Bug: So you’re trying to say that the monthly judgement you and the RBA board makes on interest rates is just a matter of you all taking a bit of a punt?

PL: Well that brings me to my third and final point.

The Bug: What happened to the second of your three points?

PL: Fucked if I know. Look, the whole point of lifting interest rates is to tackle inflation. Inflation is a killer for any economy. That’s why we have been lifting interest rates  in the past few months – to tackle inflation.

The Bug: But hasn’t it been your and the RBA’s job all along – for years, not just the past few months – to take decisions that keep a lid on inflation?

(lengthy silence)

PL: Did someone say KFC?