The Man Behind the Economic Curtain: Phillip Lowe and His Role in Shaping Australia’s Financial Future

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It appears that the Reserve Bank Governor has a lot of control over when borrowers enter the property market.

This March, ASIC—a government organisation that polices corporate crime- threatened Australia’s social media finance influencers with jail time and significant fines for giving out unlicensed financial advice.

With a sense of duty, fear or sometimes resentment, the finfluencers shifted their content, dropped off the radar or got their licence.

Yet Australia’s most likely influential personality isn’t commanding supporters via short TikTok videos or pastel Instagram tiles.

The most impactful content in 2021 has come from the Reserve Bank of Australia (RBA) for at least 164,000 new homeowners.

Late 2020 and early 2021 saw the RBA release a statement that, according to their central scenario, rates wouldn’t go up until after 2024.

Contrary to what was anticipated, the economy ran much better than expected. In light of this news, the RBA began raising interest rates by 0.10 per cent to a record high of 2.85 within seven months starting from May.

Though some believe rates will rise even higher, Westpac and ANZ predict interest rates could peak at 3.85 per cent, while NAB forecasts 3.6 per cent and the Commonwealth Bank 3.1 per cent.

According to ANZ and CoreLogic’s November housing affordability report, those with a mortgage are struggling as the average amount needed for their mortgage has risen from 31.2 per cent of their income in March 2020 to 43.3 per cent by September this year.

RBA Governor Philip Lowe stated in May that the situation was “embarrassing,” adding earlier this month that it would have been wiser to say a “less specific time frame” for interest rate increases.

On Monday, Lowe apologised for leading Australians to believe that his 2024 prediction was more of a promise than it was. This came after Greens Senator Nick McKim asked if Lowe owed borrowers an apology for “inducing” them into taking out mortgages based on the pretence that interest rates would stay low until then.

“If people acted on what we said and now regret their decisions, I apologise,” Lowe said.

“That’s unfortunate. I apologise for the situation and if people followed our advice because of it.”

It’s crucial to note that in 2021, those statements were worded as the bank’s central “scenario.”

The same lesson Millennials and Gen X investors learned about social media finfluencers applies here: always research and take in the big picture.

“Just like with any other life skill, financial literacy is something that needs to be taught,” says Glen Hare, founder of the financial advice firm Fox & Hare.

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