MNI: Bullock Unlikely To Push Major Cultural RBA Shift

Incoming Reserve Bank of Australia Governor Michele Bullock represents a "safe pair of hands" and should placate a market seeking continuity, however, she will likely not usher in any seismic shift to policy or culture, ex-staffers told MNI.

Federal Treasurer Jim Chalmers and Prime Minister Anthony Albanese revealed the decision Friday morning in Canberra (see: MNI BRIEF: Bullock To Replace Lowe As Next RBA Governor), which follows the publication of a wide-ranging review into the RBA earlier in the year, which the new governor will steward. Current Governor Philip Lowe’s term ends in September.

Ex-staffers say Bullock represents the safe choice. “I don’t think she will represent big change, given her long career at the Bank, but I think she is well placed to understand how to go about implementing the changes required following the RBA review,” noted a former RBA research economist and analyst.

Bullock beat out two other top contenders to take the job – Department of Finance Secretary Jenny Wilkinson and Treasury Secretary Steven Kennedy. She has spent over 37 years at the RBA and was named the Reserve’s first female deputy in 2022.

Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics and a former RBA economist, said an outsider may have pushed for greater change. “[Bullock] looks like the less radical approach in terms of the cultural shift, but equally I think someone who is as intimately familiar with the place is going to be more effective at pushing through these kinds of changes,” he added. “People that are identified as being resistant to change, they're a bit stuck in their ways – she's not one of them.”

Lowe laid out the path for some of the initial reforms this week (see: MNI BRIEF: Lowe Lays Out Board Meeting Reform), notably cutting down yearly meetings to eight from 11.

ANY LESS DOVISH?

Langcake said the RBA had arrived at a critical juncture for monetary policy and its reform. “That's where continuity becomes really important in terms of the message [authorities] are sending to the market on interest rates," he argued. "Lowe would have been the ultimate choice in continuity, but [Bullock] is a pretty close second.”

He noted Bullock would struggle to be less dovish than Lowe has during recent communications, however, any difference in opinion will be marginal. “I don't think we can say with any confidence that wage growth has peaked,” he added. “We still have an unemployment rate that's below 4%, so our inflation problems have further to run than the U.S. The RBA will be very attuned to any hints of an upside surprise in the upcoming quarterly CPI data and I expect it to move [25bp] at the next two meetings."

The former research economist noted Bullock’s June speech, which pointed to the non-accelerating inflation rate of unemployment estimates and the current unemployment rate, suggested higher rates were needed. “The unemployment rate forecast, as it stands, is not returning to 4.5% in the near term, so that would suggest the RBA needs to increase interest rates,” he said.

The RBA, which paused rates at 4.1% this month, next meets August 8. Lowe will deliver his last Statement on Monetary Policy on August 11.