Burden of unpopularity worth it to get inflation down

In his final appearance before the House of Representatives Economics Committee as central bank governor, Dr Lowe admitted to having seen media coverage describing him as the most unpopular person in the country.

"It is much harder for the political class to be unpopular in the way that I am unpopular," he said. "You can be very unpopular when you are constraining the economy."

It was a passing remark in a hearing that went for almost three hours, but it provided a window into the strain the RBA head has been under, particularly since rates began going up last May.

In his typically straightforward manner, Dr Lowe was sympathetic but unapologetic about the impact high interest rates have had on many households, particularly those carrying big mortgages or renting.

Instead, he emphasised how more damaging and painful high inflation has been.

"Everybody is hurting, because high inflation is eroding people's real incomes. High inflation is causing everyone pain," he said, reiterating the central bank's resolve to bring it down.

Amid the understandable focus on the real significant financial pressure all are feeling, it can be easy to overlook what has been achieved.

While inflation is still too high and is expected to linger above the 2 to 3 per cent target band for some time yet, it is coming down at the same time that unemployment remains near its lowest point in 50 years.

The jobless rate is forecast to build as the economy slows, but at this stage the Reserve Bank reckons it will not top 4.5 per cent, the mark at which it thinks the country will be at full employment.

And Dr Lowe has held out the prospect of a return to real wages growth possibly before the end of the year, or at least early next year.

At a time when so much of the world is struggling with slow growth and even higher interest rates than here, this would be a creditable outcome.

Of course, this could easily be derailed.

One of the biggest risks is China, which if facing the risk of deflation.

After a short burst of activity after emerging from COVID lockdowns, the Chinese economy has slowed, its property market is depressed and wary consumers are saving instead of spending. Because this is Australia's biggest commodity market, this could have significant implications here.

Rising house prices and wage rises from the tight labour market is another source of uncertainty. Housing wealth could cause some to lift their spending while higher wages not backed by a lift in productivity also pose an inflation risk.

But for Dr Lowe, these are problems largely for his successor, Michele Bullock, to navigate.

After a four-decade career at the central bank, the governor is bequeathing an institution, and an economy, that is in transformation.

Dr Lowe gave the impression that he is not altogether disappointed to be handing over the reins.

Asked if he will remain in public life following his retirement as governor, he was firm: "I will be working on getting my golf handicap down to single digits".