It seems the most intriguing aspect of this private lunch was the fact that Dr Lowe veered away from tradition to attend. He decided to skip the customary public address following the first RBA board meeting of the year, a tradition that’s been upheld since 2017.
Dr Lowe acknowledged on Wednesday that his decision to attend the private lunch with major bank bond traders was motivated by a concern that he may have been “talking too much”.
“A number of people have questioned why I did that rather than a public speech. In previous years, I have generally started the year with an address to the National Press Club and the three-hour hearing, the House Economics Committee, and I’ve done that in the first week of February. From my perspective that worked quite well, but I had feedback about that. One piece of feedback was “maybe you’re talking too much”. And it is possible to talk too much. So, I was being conscious of that,” Dr Lowe said.
“The other piece of feedback that I’d had was that to start the year it was better to address the questions of the parliament rather than the media … Some people suggested that the order should be reversed, it should be the parliament, whose questions I answer, rather that the 15 minutes of questions addressed at the National Press Club.”
Moreover, Dr Lowe said a change in scheduling meant he had a “gap in my diary”.
“Normally I would have addressed the House Economics Committee last Friday, but that got pushed back to this Friday. So, I listened to that feedback and I decided that this year, I would first address the questions asked of me by the parliament and that got pushed back a week, so there was a gap in my diary and I wanted to hear what people in the market had been saying about our recent decision, so I accepted an invitation to that lunch,” the governor said.
Addressing concerns about the timing of the RBA meeting and the release of the statement on monetary policy, Dr Lowe said he had thought that “it was manageable”.
As such, he conceded, the bank will no longer do “those types of lunches before the release of the statement”.
“There’s nothing untoward here, it’s appropriate. I can’t live in a bubble, I need to talk to people, I need to hear what financial markets say, and I like asking people question.”
On the matter of the questionable bond activity that coincided with the lunch, Dr Lowe said: “When I saw that I was concerned something untoward could have happened, but these are the facts as I know them and I want to share them with you”.
“I arrived at the lunch at 12.30 pm, after the executive committee at the bank, and I had a brief discussion with the CEO and the chief economist of Barrenjoey about their business model and how things were going, and the competition they were bringing to the marketplace. And then, went into the room with maybe 15 or 20 guests, sat down and I started speaking probably around 12.50 pm after the CEO of Barrenjoey told the room about the things they were doing.
“The lunch finished at 2 pm. So we looked at the bond yields, they’d been rising earlier in the morning and then for an hour or two they had been flat and then they started rising at 12 pm. And then they rose fairly civilly between 12 and 2 pm. Exactly the same movements were happening in New Zealand, at the same time and over the couple of days the movements in Australian yields are almost exactly the same as the movement in US Treasury. So they’re the facts as I know them.”
Dr Lowe was, however, critical of the people who, he said, ran straight from the lunch to the press.
“If you’re meeting with me, you want to have the confidence that I won’t go to the press or tell other people what you’ve said, and I expect the same courtesy.”
Dr Lowe was also questioned by Senator Andrew Bragg about the potential impact of perceived “personal attacks” on him on the Reserve Bank’s independence. In response, Dr Lowe stated that he does not believe the independence of the bank is currently under threat.
“It’s not affecting our decision making let me assure you of that,” he said.
“There is no pressure from Treasurer Chalmers. It’s noisy, but raising interest rates is always unpopular, it affects the whole community, and the representatives of the community will sometimes want to talk about that but we keep doing our job.”
