The Governor of the Reserve Bank Philip Lowe has apologised to the nation.
In particular, he has apologised to all those Australians who believed his forecasts about interest rates and went out and borrowed to buy homes and investment properties, in the expectation that mortgage rates would not be rising in the near future.
As apologies go, this is a particularly empty one.
Philip Lowe’s apology is meaningless and worthless to anyone who has been caught by surprise by the difference between what he said he would do and what he ended up doing.
Throughout 2021, the RBA Governor said interest rates would not rise before 2024.
He was quite adamant about it and he said it repeatedly.
As recently as January 2022, the clearly stated position was that interest rates would not rise in 2022 or in 2023.
And then, a few months later, he and his board started aggressively lifting interest rates.
He is now trying to suggest his comments were misunderstood, but there was no misunderstanding here.
The truth is the Reserve Bank and its team of economists got it horribly wrong.
They failed to accurately forecast what would happen with inflation.
Other economists and commentators across Australia were warning in late 2021 and early 2022 that the RBA was wrong – but Philip Lowe continued to maintain his official position.
And then we saw an about-face that has startled a lot of Australians.
The key question is: how did they get it so wrong? How did they fail so spectacularly in their analysis about what was happening and about to happen with inflation?
And why is no one being held to account for this monumental failure.
One of the problems in this situation is that Philip Lowe and his colleagues are ivory tower dwellers, with no real understanding of the impacts of their comments and decisions on the people at ground level.
An apology is not good enough.
Philip Lowe should resign.