Michele Bullock will face an immense task upon taking over at Australia’s central bank this month: rising interest rates across developed economies – not least Australia itself, where cash rates have already reached nine-year highs in order to reduce consumer spending and curb inflation.
But the key question remains: can Bullock successfully lead an upward cycle in rates? While no firm answer has been reached at this stage, Bullock certainly possesses certain assets which should give her an advantage: She is an RBA lifer with four decades of experience as well as being female governor for the institution 63-year history; in addition she will also be well acquainted with recommendations of RBA review to make RBA less error prone and responsive to market needs.
Finally, she enjoys tremendous political support. Many members of the Coalition have been pushing Treasurer Jim Chalmers to remove Lowe, whom many criticized for mishandling monetary policy during the COVID-19 pandemic and encouraging people to borrow by suggesting interest rates wouldn’t rise until 2024 – something which turned out to be wrong and caused significant financial strain for Australian households.
Under these circumstances, it was extremely difficult for the government to reappoint Lowe as RBA governor, especially given findings of its review that revealed self-destruction within the institution and required major reform. But by choosing Deputy Governor Bullock instead, they were able to achieve an ideal balance between continuity and change.
As RBA’s new monetary policy head, she will be responsible for communicating decisions made by the bank to markets and households. In selecting her as candidate for appointment, RBA chose an experienced career central banker who comprehends the need to transform an organisation. Furthermore, this choice was notable because she is widely recognised as an effective communicator – this distinction will serve her well when she takes up her duties of communicating these decisions to markets and households.
As governor, she will make multiple media appearances every year, which may not have been necessary during Lowe’s term as RBA governor. She can expect tough questioning at press conferences that was rarely experienced under Lowe.
However, it would be unrealistic to expect major shifts in how the Reserve Bank sets monetary policy under Bullock. Like her predecessors, she will likely be influenced by North American rationalist economists known as neo-liberals but that does not equate to more interventionist policies or less commitment to fulfilling its mandate of price stability and sustainable growth.