Michele Bullock has been chosen as the new head of the Australia's central bank, replacing incumbent governor Philip Lowe.

Bullock will begin her role in September as the first female governor in the 63-year history of the Reserve Bank of Australia (RBA).

The decision comes after several interest rate rises in Australia, as in most major economies, in the past year or so. 

Treasurer Jim Chalmers and Prime Minister Anthony Albanese announced that Lowe would not be reappointed, marking the end of his 43-year career in various roles at the bank after completing his current seven-year term on September 17.

'Challenging time' to enter the role, Bullock concedes

Currently serving as the deputy governor, Bullock is highly regarded by economists.

Chalmers said the first woman taking the helm at the RBA was a "history-making appointment."

"I am deeply honored to have been appointed to this important position," Bullock said. "It is a challenging time to be coming into this role, but I will be supported by a strong executive team and boards."

The RBA is undergoing its most substantial reorganization in three decades, prompted by an independent review into its operations, which called for significant modifications in policy formulation and communication strategies.

Rising rates unpopular in some quarters 

Lowe's tenure at the bank has been marred by criticism from the government and media due to the rate hikes aimed at curbing inflation, which have burdened homeowners with rising mortgage costs.

The government faced mounting pressure to remove Lowe from his position after his 2021 statements encouraging borrowing, stating that interest rates were unlikely to increase until 2024, only for hikes to commence in mid-2022.

One major reason for this was the rapid acceleration in inflation triggered by Russia's invasion of Ukraine in February 2022, exacerbating inflationary pressure in the aftermath of the COVID pandemic.

Since then, rates have been raised 12 times, reaching 4.1%, their highest level in a decade.

That said, during the COVID pandemic, Lowe had been forced to slash rates to 0% —  levels never before seen in the RBA's history — in a bid to encourage as much economic activity as possible amid severe restrictions on trade and travel. Interest is still lower in Australia than it has been for most of this century. 

Lowe recently mentioned the possibility of further rate increases to try to control inflation.

The speculation surrounding a leadership change had been brewing for months, even as Lowe took the unusual step of apologizing to borrowers who had acted based on his previous advice.

ss/msh (AFP, Reuters)