I know it's hard, but it could be harder: Lowe

Appearing at a Senate hearing today, Reserve Bank of Australia (RBA) governor Philip Lowe says people have forgotten how corrosive inflation is.

The governor explained the RBA has one priority and that is to bring inflation down.

"Inflation at the moment is 7.8% and way too high, it needs to come down," he says.

Lowe added it's been 30 years since high inflation "eroded savings", worsened inequality and "hurt the poor."

"Our job as the country's central bank is to make sure that doesn't happen again," he says.

"Part of the way we do that is to remind people of the dangers of it and say, 'Well if we return to that world, you'll have all these nasties again'.

"I know it's really hard for people to have to pay more on their mortgages, but it'll be harder if inflation gets too high and stays too high, meaning even higher interest rates and lower employment."

However, not everyone was convinced. Senator McKim fired back, saying Australians took on mass debt following Lowe's recommendation that interest rates were unlikely to rise until 2024.

McKim highlighted that Lowe also admitted to overdoing monetary stimulus during the pandemic and says rents weren't likely to be significantly impacted by interest rate increases.

"You seem prepared to smash Australia into a recession by trying to squash demand in response to inflation that has, on the RBA's own analysis, been predominantly a result of supply-side factors," he says.

"Can you explain to the renters and mortgage holders of Australia, why you still deserve to hold your job?"

Lowe says he fully intends to serve out his seven-year term.

"The decisions that the Reserve Bank made are made by a board of nine people. It's not just me, and we make them collectively and collaboratively," he says.

"We are trying to navigate a neuropathy. We want to get inflation down because it's dangerous, it's corrosive, it hurts people, it damages income inequality. And if it stays high, it leads to higher interest rates and, and more unemployment."

This article first appeared on Financial Standard

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