<\/p>\n
Philip Lowe in 2023.<\/p>\n
(Bloomberg) — Former Australian central bank Governor Philip Lowe said a clouded outlook for the nation\u2019s high unit labor costs suggests the best course for the Reserve Bank is to \u201csit still.\u201d<\/p>\n
Most Read from Bloomberg<\/p>\n<\/p>\n
Speaking to Bloomberg Television\u2019s \u201cThe China Show\u201d on Thursday, Lowe pointed out that the average cost of labor per unit of output produced has been running at close to 5% for a number of years and that made it tough to achieve 2.5% inflation, the midpoint of the RBA\u2019s 2-3% target.<\/p>\n
Lowering unit labor costs is best done by boosting productivity growth, he said. \u201cBut if that doesn\u2019t happen, then nominal wage growth has to slow and that probably requires tight monetary policy for a while,\u201d Lowe said in Singapore.<\/p>\n
\u201cWhile they work that out,\u201d the former governor said, referring to the RBA, \u201cit\u2019s best to sit still, just in case it doesn\u2019t slow.\u201d<\/p>\n
Lowe, who was attending the Barclays Asia Forum, stepped down as governor just over two years ago. He faced intense political pressure in his final years after giving forward guidance during the pandemic that rates were unlikely to rise from near-zero levels until 2024.<\/p>\n
However, a burst of post-Covid inflation forced him to oversee one of the most aggressive tightening campaigns in RBA history. That drew heavy criticism and the bank was subject to an independent review that resulted in a number of changes being implemented. In the end, Lowe wasn\u2019t reappointed in 2023 after a seven-year term and he was replaced by Governor Michele Bullock.<\/p>\n
Lowe was asked what he would do at next week\u2019s policy meeting if he was still in the chair. He grinned and responded: \u201cI\u2019m not in the chair, so that\u2019s good.\u201d<\/p>\n
He went on to say that \u201cinflation data has spoken\u201d \u2014 after a report Wednesday showed consumer prices jumped last quarter \u2014 and policymakers are likely to keep rates where they are for a while to see \u201cwhether this is an aberration or whether it\u2019s more persistent.\u201d<\/p>\n
Asked about the outlook and risks for Australia, Lowe said the economy \u201cseems to have settled into a 2% growth path,\u201d adding that its fundamentals \u2014 strong population growth, a AAA credit rating, great natural resources, a fantastic education system and a dynamic and innovative workforce \u2014 are positive.<\/p>\n
But, he added, business investment has been weak for a number of years and isn\u2019t keeping pace with growth in the population, so that needs to be \u201cre-energized.\u201d<\/p>\n
On Australia\u2019s biggest trading partner, Lowe said that longer-term he\u2019s \u201creally optimistic\u201d about China because he\u2019s optimistic about technology.<\/p>\n
\u201cIn the end it\u2019s technology that drives higher living standards and China, like the US, is making huge investments in new technologies and in the end I think that will drive higher living standards,\u201d he said.<\/p>\n
Lowe said in the near-term there are obviously issues with China\u2019s property market, with the shakeout of the sector still having a way to go because while other countries tended to experience a financial crisis and move on fairly quickly, China had taken a different route.<\/p>\n
There\u2019s still a lot of stress in the system and that\u2019s weighing on China\u2019s economy but it will run its course, Lowe said, estimating it\u2019s still a couple of years away.<\/p>\n
\u201cIn the end I\u2019m optimistic about China and that will be good for Australia,\u201d he said.<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"Philip Lowe in 2023. (Bloomberg) — Former Australian central bank Governor Philip Lowe said a clouded outlook for…\n","protected":false},"author":2,"featured_media":233639,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[4056,90035,84,1294,99199,99200,35665,56,54,55],"class_list":{"0":"post-233638","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bloomberg","9":"tag-bloomberg-television","10":"tag-business","11":"tag-economy","12":"tag-philip-lowe","13":"tag-productivity-growth","14":"tag-reserve-bank","15":"tag-uk","16":"tag-united-kingdom","17":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/233638","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=233638"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/233638\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/233639"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=233638"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=233638"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=233638"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}