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After almost four decades at the Reserve Bank, Michele Bullock becomes its first female governor – can she implement the reforms it needs to be more accountable? By Mike Seccombe.

Bullock at the gate: meet the next RBA governor

A woman with shoulder-length hair and glasses.
The incoming governor of the Reserve Bank of Australia, Michele Bullock.
Credit: AAP Image / Lukas Coch

In the early 1990s, as Australia was beginning to emerge from a deep recession, Nicki Hutley, a young economist working for Deutsche Bank, was asked during a radio interview what she thought people would be saying in 12 months’ time.

She recalls: “I said, glibly: ‘Well, you know, 12 months from now, people will be saying, ‘Recession? What recession?’  ”

Later, a victim of the recession rang her office, angry and upset. “And he said, ‘I’ve lost my home and my family. And you know, I will be suffering from this for years to come.’ ”

It taught her a salutary lesson. “Economists can’t talk like the numbers don’t have faces to them,” she says.

Three decades later, she is reflecting on this month’s Economic Society of Australia lunch in Brisbane, where Philip Lowe, the outgoing head of the Reserve Bank of Australia, was the guest speaker.

As usual, Lowe delivered his assessment of the economy in the arcane language of a boffin who has spent his life working for an insular institution. On the matter of likely job losses, he said, “The slow growth in demand is expected to lead to some rise in unemployment and a moderation in growth in unit labour costs.”

After he had finished speaking, Lowe returned to the table where Hutley – now an independent economist and office holder at the Economic Society with a long and successful career – was sitting. She tried to engage him about the dispassionate way he expressed himself.

“I said, ‘You know, you’re talking about 100,000 or 150,000 people losing their jobs.’ And he said that all those people losing their jobs would be the least-worst outcome to get inflation under control,” she says. “It was like it was a good thing. Like, ‘Can’t you see that?’ ”

As an economist, she gets why Lowe and the RBA board have been jacking up interest rates. But she doesn’t think he and the bank have done a satisfactory job of explaining it in ways people, many of them currently hurting, can relate to.

“More transparency, more explanation and better communication and more empathy, I think would help people understand – even if it’s still not palatable – the decisions that are made,” she says.

Changes in this direction are now afoot. The most obvious is that Lowe will be replaced as RBA governor by Michele Bullock, starting September 18. She will be the first woman to serve in the role, as the most senior economic authority in the country next to the treasurer.

She might seem an obvious choice. Bullock has served as Lowe’s deputy for the past 18 months and, like him, she is an RBA “lifer”, having served in a variety of management positions at the bank over almost four decades. However, it’s this institutional experience that’s leading some to question whether she is the change agent the bank needs.

That’s a significant question given the scale of the overhaul to come, following the recommendations of the review that reported to Treasurer Jim Chalmers last month, and which both Lowe and Bullock have publicly embraced.

A restructure will establish two boards – one to oversee the bank’s governance and one responsible for the setting of rates and comprising monetary policy experts. This policy board will meet eight times a year, instead of 11 as now, and its meetings will be longer, stretching over two days. At the conclusion of each, the governor will for the first time be required to explain the board’s decision in a press conference. These addresses are the centrepiece of a push to improve transparency in a process that is notoriously secretive, and consequential to the lives of all Australians.

Cherelle Murphy, Oceania chief economist for Ernst & Young (EY), who formerly worked for the RBA, says Bullock is up to the task of reform. “Just because she’s been there for her entire career does not mean that she is not open to change. In fact, I think probably she is quite open to change,” says Murphy.

“She’s an all-rounder in a way. She’s a good economist, good leader, good people person, and she is open-minded.”

The only unusual aspect of Bullock’s career path is she had not, until her elevation to deputy governor, held any senior role related to the setting of interest rates.

“Michele Bullock started her career in the same area of the bank as her three predecessors, the economic analysis section – which is sort of the engine room, the area that is most directly involved in providing advice on which monetary policy decisions are made,” says independent economist Saul Eslake.

“But most of her subsequent career has been spent in things like the payment system and financial supervision, which, although they’re important, would be generally considered to be second-order assumed compared with the setting of interest rates.”

That probably works in her favour, given the bank’s record on interest-rate setting over the seven years Lowe has been in charge. It has been widely criticised for not cutting rates more aggressively to stimulate jobs growth during a period when inflation was persistently low, then moving too slowly to increase them when inflation took off. As noted in The Australian Financial Review last week, inflation was within the RBA’s 2-3 per cent target band for just six months of Lowe’s seven-year tenure.

Only after Bullock became deputy in April last year did the bank begin raising rates, and inflation was by then galloping. Rates have risen 12 times, and Lowe has suggested the cycle isn’t done yet.


Bullock remains something of an unknown quantity when it comes to monetary policy setting, says Eslake, given she has had little to say publicly about it in the past – with one notable exception. Last month, she said the unemployment rate, now 3.5 per cent, would need to get to 4.5 per cent before inflation would be tamed.

“Do a bit of maths – that’s 140,000 people losing their jobs,” he says.

“Some people have said, ‘Aha, that means she’s more hawkish than Phil.’ Now, I’m not sure you could have been more hawkish than Phil over the past 30 months, having raised interest rates more rapidly than any time since the Reserve Bank gained its independence.”

To Eslake, Bullock’s speech suggests she will hew to the same questionable economic beliefs as her predecessor, and interest rates will probably go higher despite there being “no obvious need” for that to happen.

Hutley, referring to the same Bullock speech, worries not much will change in presentational terms either: same abstruse language, lots of data and graphs.

Of course, there are good reasons for central bankers to be cautious about what they say.

“Every single word that is said gets analysed to death by the markets, the media,” says Murphy.

It serves the bank’s credibility for its pronouncements to be a bit Delphic. She refers to Lowe’s statement in 2020 that rates were unlikely to rise until 2024. It wasn’t a promise, but the date was widely seized upon as a forecast.

“If you say, as Philip Lowe said, something that is quite definite … you will be held to account for that. If there is a slip, like there was with the 2024 comment from the governor – which he regrets and has said so – the implications are enormous.

“So, being vague, in some ways, is a way to get around that problem.

“Like the rest of us, they don’t know what’s coming up in future. They have forecasts, but they don’t know. And so they have to maintain some kind of degree of nimbleness around that,” says Murphy.

In his speech to the Economic Society, Lowe also flagged other changes to accompany the new monetary board – assuming parliament agrees. These include the publication of an “unattributed vote count” and regular public appearances by board members “to discuss their thinking and decisions on monetary policy”.

The changes are intended to make for better decisions in a less opaque process. As it stands, those deliberations are secretive apparently even to insiders – a staff survey conducted for the review found most were dissatisfied with the bank’s processes. Most of the board has no specific expertise in monetary policy, comprising mostly representatives of business who have been discouraged from engaging directly with bank staff. No formal votes are recorded, and board members have been discouraged from making any public indications about their thinking, in sharp contrast to board members of other central banks, such as the United States Federal Reserve, who speak regularly.

Warwick McKibbin, professor of economics and public policy at the Australian National University’s Crawford School of Public Policy, who served for a decade on the RBA board, sees a couple of good reasons for this silence. (His wife, Professor Renée Fry-McKibbin, was one of the three members of the RBA review panel.) First, he says, the current board represents sectoral interests, and if “your corporate interest is different to the interests of the Australian public, you’re in an awful position to say what you think policy should do”. Moreover, “if you haven’t got the expertise to understand how complex economies work, it’s going to be tough to do, and to do a press conference”.

When he was on the board, McKibbin was given some dispensation to make public comment, because he was an actual expert in monetary policy, and not representative of any vested interest.

Even so, there was tension. He served under two governors, Glenn Stevens and Ian Macfarlane.

“I got on very well with Glenn; he was quite happy for me to speak. I got on less well with Ian,” McKibbin says.

Indeed, Macfarlane flew into print after the review came out, arguing there should be fewer, not more, “public pronouncements” from the board, as they could lead to public disagreements.

Others note the RBA has been less than consistent in its pronouncements under the current regime, leading to a continual guessing game about its thinking.

Pat Bustamante, senior economist at Westpac business bank, welcomes the prospect of the RBA having to explain in greater detail “why they landed on the policy outcome they did, what factors were considered? At the moment that doesn’t really happen – there’s just a statement that gets released at 2.30 that’s one page long.”

The bottom line is the RBA board and its new governor will have to do a lot more explaining, will have to engage more. And one thing McKibbin, Eslake and Hutley would like to see Bullock engage on is the notion that unemployment must go up in order for inflation to come down.

That “standard idea” of a fixed relationship between the two, says McKibbin, might not apply in the current circumstances, in which inflation has been “largely internationally generated through energy and food markets, from Covid and the Ukraine war, from all the disruption in the production networks all over the world”.

“Inflation came in without the labour markets causing it. And it can go out the same way. That’s what we’re seeing in the US, and certainly what we’re seeing in Australia,” he says. The US job market continues to grow even as inflation has eased.

Eslake says while interest rates may rise again, the hikes already announced have probably done enough, once they flow fully through the economy, to lick inflation. The job then may be to steer the economy away from recession.

“It may well be that Michele Bullock’s first decision about moving interest rates might be to cut them,” he says.

And the new RBA boss would do well to consider Hutley’s advice: don’t talk like the numbers don’t have faces to them.

This article was first published in the print edition of The Saturday Paper on July 22, 2023 as "Bullock at the gate: meet the next RBA governor".

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