Glenn Stevens' deputy, Philip Lowe, has been appointed governor of the Reserve Bank in one of the government's last acts before it goes into caretaker mode.
Governor Stevens, 58, has served at the top of the RBA for a decade after being elevated from the deputy governor's position in 2006. Offered reappointment in 2013 after successfully navigating the global financial crisis, he agreed to serve for only three years rather than the standard seven. His second term expires in September.
Dr Lowe, 55, has worked at the bank since 1980 while still a student at the University of New South Wales. He has served as its head of economics, head financial stability, head of domestic markets and assistant governor responsible for the financial system.
He also served as head of the financial institutions and infrastructure division at the Bank for International Settlements in Switzerland, where he authored important research on the role of central banks in low-inflation environments.
Mr Stevens described the appointment as "superb". "There could be no one better qualified than Phil Lowe to lead the bank through the next seven years," he said. "The bank will be in the best hands."
Shadow treasurer Chris Bowen, who worked with Dr Lowe while treasurer in the Gillard government, described him as "one of the finest Australian economists of his generation".
He said Mr Stevens had guided Australia through the highs of the mining boom and the lows of the global financial crisis, and had served Australia well.
Speaking from Ottawa, where he is attending international meetings, Dr Lowe said he was deeply honoured and looked forward to continuing the important work of the bank for the people of Australia.
Treasurer Scott Morrison also took the opportunity to appoint a new Reserve Bank board member, Ian Harper, to replace former Labor staffer John Edwards, whose five-year term expires in July.
Professor Harper recently chaired the Harper review of the Australian financial system, served as key member of the Wallis inquiry into the Australian financial system in 1996 and was appointed by the Howard government as the first head of the Fair Pay Commission in 2006.
Mr Morrison said Professor Harper's combined experience in public policy development and academia would enable him to make a strong contribution. In a press release, Mr Bowen merely "noted" the appointment and said Dr Edwards would have been worthy of reappointment.
Australia's dollar climbed from a seven-week low after a government report showed retail sales rose more in March than economists had forecast. Gains were maintained after the government announced Mr Lowe's appointment.
The currency rose against all except one of its 16 major peers as separate data showed the trade deficit narrowed more than analysts had predicted. The Aussie had slumped 2.7 per cent in the previous two days after the RBA lowered its benchmark by a quarter point to 1.75 per cent and traders bet it would cut again in the next 12 months. The nation's bonds rose for a third day, pushing yields lower.
"The economic data released today supports a rally in the Australian dollar," said Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney. "However, in the current environment, we don't believe the Aussie will be that strong, partly because Australian bond yields have not moved higher on the economic data and partly because it will take at least until the end of the trading week before participants put the surprise RBA rate cut behind them."
Australia's dollar gained 0.7 per cent to US75.09¢ as of 7:55 a.m. in London after dropping to US74.47¢ on Wednesday, the lowest level since March 16. The benchmark 10-year bond yield fell four basis points to 2.39 per cent after touching 2.37 per cent, the lowest since March 1.
Fibonacci analysis
Wednesday's low for the currency was close to the 38.2 per cent retracement of the Aussie's advance from a seven-year low of US68.27¢ on January 15 to a 10-month high of US78.35¢ on April 21. That's a level some technical traders see as providing support, based on Fibonacci analysis.
Mr Lowe's appointment would "be welcomed by the market because Lowe is a solid and known individual", said Commonwealth Bank's Grace. "He doesn't hold wildly diverging views to the current governor and so we probably won't see much of a reaction from the market."
With Bloomberg
