Good move. Up to the rolling of Tony Abbott last September, one rumour just wouldn’t go away: that they would look outside the Reserve Bank for a new governor when time came in 2016 to find a replacement for Glenn Stevens, who steps down on September 17. It was a rumour that worried the upper level of the bank, and had several senior officials looking outside for boltholes in the event that deputy Phil Lowe was not given the job. Tony Abbott and his chief of staff Peta Credlin were said to be still be unhappy with the central bank and the way it put up interest rates in the 2007 election campaign. They were said to be assembling a list of candidates from outside the bank. And the unease inside upper levels of the bank was easy to understand because Abbott and Credlin had blood on their hands when, soon after the Coalition won the 2013 poll, they sacked three well-regarded departmental heads including two — Andrew Metcalfe and Martin Parkinson — who were among the best of the Rudd-Abbott era.
Parkinson’s sacking was, for those at the top of Martin Place in Sydney, the big shock. He was the head of Treasury, sat in on every monthly board member as the federal government’s representative, and was highly regarded, from Glenn Stevens down, for his ability and integrity. It did not help matters when the unlamented Joe Hockey was forced to ask Abbott to keep Parkinson to stay on to help not only with the 2014-15 budget but the Group of 20 meeting in Brisbane later that year. Parkinson had the global contacts among his peers in the G20, as well as the IMF, World Bank and OECD, the ADB — the key global economic bodies so far as Australia was concerned. The man who Abbott and Credlin had lined up to replace Parkinson, John Fraser — a former senior Treasury official (whose mentor was John Stone, a conservative former head of Treasury) — was an unknown globally because he had been tucked away at UBS (the big Swiss bank), running their asset management business around the GFC, which almost collapsed UBS but for a bailout by the Swiss central bank and taxpayers. — Glenn Dyer
RBA relieved. So last night’s decision by the government, announced by Treasurer Scott Morrison revealing that Glenn Stevens will be replaced by deputy Phil Lowe was very much appreciated by those at the top of the bank. Now the decision (after the poll), will be who will be deputy governor? It could come down to two, based on length of service: Malcolm Edey, who is the assistant governor overseeing the financial system, or Guy Debelle who is the assistant governor overseeing the financial markets. The third senior official is Chris Kent who is the assistant governor in charge of the economics group, which is traditionally the powerhouse at the bank and the way to the top job. He was named to his current job in 2012, so has not been in his position for as long as Debelle (2007) or Edey (2009).
Lowe was named RBA Deputy Governor 2012 (Chris Kent replaced him at the Economics Group) and before that headed up the bank’s financial system department. Lowe also served as head of the financial institutions and infrastructure division at the Bank for International Settlements (2000-2002). He has a PhD in economics from the Massachusetts Institute of Technology after being awarded the University Medal for his undergraduate studies in economics at the University of NSW. — Glenn Dyer
MIT rules, OK! Lowe’s appointment means the MIT mafia now dominate the upper levels of the bank. Besides himself, Debelle and Kent have doctorates from MIT. And two economists in particular will have a stronger influence in the thinking at the RBA (and make it one of the better connected central banks in the world). Stanley Fischer, now deputy governor of the US Federal Reserve, and the late Rudi Dornbusch were overseeing the PhD program at MIT in the 1990s when Lowe, Debelle and Kent did their doctorates. Dornbusch was the PhD adviser for Lowe, Debelle and Kent. Debelle was also supervised by Stanley Fischer (all students had two supervisors). Fischer is also a former governor of Israel’s central bank. Ben Bernanke, the former head of the Fed was supervised by Fischer for his PhD and then went on to be a teacher at MIT. Glenn Stevens obtained its doctorate at the University of Western Ontario. So the MIT strain of economic thinking (more deliberate and questioning than the Chicago School’s “markets first and rule” approach) will rule, OK! — Glenn Dyer