‘We got things wrong’: Lowe defends his legacy
The RBA governor is due to step down on September 17
2 min
Outgoing Reserve Bank governor Philip Lowe has defended his legacy in his final speech in the top job, insisting he is not to blame for Australia’s soaring home prices.
Dr Lowe’s final few years at the RBA have been characterised by rapidly rising interest rates, made harder for borrowers to swallow by his earlier forecasts that an upward shift would not commence until 2024.
The cash rate began rising in May last year and is now a staggering 4 percent higher following a record run of hikes, the swiftest since the 1980s, but Dr Lowe is unrepentant.
“The issue that has defined my term more than any other is the forward guidance about interest rates that was provided during the pandemic,” he said in an address on Thursday.
“That guidance was widely interpreted as a commitment, rather than a conditional statement, that interest rates would not increase until 2024.”
Red hot inflation offered the RBA no other choice than to begin a dramatic tightening cycle. He repeated his belief that his assurance of rates remaining on hold was never a firm one.
“There has been much criticism since [rates increased], especially by those who borrowed during the pandemic based on our guidance,” he said.
“I ask that people keep in mind the circumstances we faced in 2020. It was a very scary time. There were credible projections that the unemployment rate would rise to 15 percent and that there would be a deep and lasting economic contraction.
“And even well into 2021, large parts of country were still in stringent lockdowns.”
However, Dr Lowe conceded that “with the benefit of hindsight”, he now believes the RBA “did do too much” in terms of implementing emergency measures in the early stages of COVID.
“But hindsight is a wonderful thing,” he said. “We got some things right, but we got other things wrong.”
He rejects the view that keeping rates at a record low of 0.1 per cent for so long is responsible for home prices rising at one of the fastest paces in history during 2021.
“Rather, it is the outcome of the choices we have made as a society – choices about where we live, how we design our cities and zone and regulate urban land, how we invest in and design transport systems, and how we tax land and housing investment.”
One big thing Dr Lowe does not regret is increasing the cash rate in a bid to get a handle on inflation, acknowledging the move as “unpopular” with much of the public but declaring it “the right thing to do”.
He took a final parting shot at the media, which he claimed had inflamed tensions with “clickbait” news about rates, fuelling “vitriol [and] personal attacks”.
Dr Lowe has spent 43 years at the RBA and the past seven as governor. He officially steps away next week, replaced by current deputy governor Michele Bullock.
Economists forecast her first change to rates will be some time in 2024 – and will likely be a reduction, based on current fiscal indicators.
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Strong consumer spending and tight supply have driven retail to the top of commercial property, but signs of pressure are starting to emerge.
2 min
Australia’s retail property sector entered 2026 as the strongest performing commercial asset class, but rising geopolitical risks and cost pressures are beginning to test its resilience, according to new research from Knight Frank.
The latest Australian Retail Review shows the sector rode a wave of consumer spending and constrained supply through 2025, delivering total returns of 9.2 per cent and driving transaction volumes up 43 per cent year-on-year to $14.4 billion.
That momentum carried into early 2026, with around $3.6 billion in deals recorded in the first quarter alone.
“Retail clearly emerged as the standout commercial property performer in 2025,” said Knight Frank Senior Economist, Research & Consulting Alistair Read.
“Improving household spending, limited new supply and stronger leasing fundamentals combined to drive better income growth and renewed investor confidence in the sector.”
Spending rebound drives retail strength
A lift in household spending has been central to the sector’s performance. Consumer spending rose 4.6 per cent year-on-year to February 2026, supported by easing inflation and improving real incomes.
That shift flowed directly into retailer performance, with average EBIT margins across major retailers rising to 8.9 per cent in the first half of 2026, their strongest level in several years.
“Stronger consumer spending was critical in restoring momentum to the retail sector,” Mr Read said.
“Retailers have generally been better able to absorb costs, rebuild margins and support sustainable rental outcomes, particularly in higher-quality centres.”
Improved trading conditions also pushed leasing spreads up 4.2 per cent in 2025, reinforcing income growth and supporting capital values.
Geopolitical tensions begin to bite
But the outlook has become more complicated. The report warns that escalating conflict in the Middle East and its impact on fuel prices, supply chains and interest rates could weigh heavily on consumer spending.
“Higher fuel prices, flow-on cost pressures across supply chains, and recent interest rate increases are collectively squeezing household budgets, and early consumer sentiment data suggests confidence is already softening,” Mr Read said.
“While household balance sheets remain generally resilient, heightened uncertainty over future costs is likely to weigh on spending — particularly in discretionary categories — in the months ahead.”
The impact is already being felt in investment activity. While the year began strongly, transaction volumes slowed in March as investors paused amid the uncertainty.
“Early indicators suggest elevated uncertainty has already begun to affect the market. While retail investment enjoyed its strongest start to a year in a decade, with nearly $3 billion transacted by the end of February, activity stalled in March, as investors took a pause amid elevated uncertainty,” Mr Read said.
Solid foundations support medium-term outlook
Despite the near-term headwinds, Knight Frank maintains that the sector’s underlying fundamentals remain strong. Limited new supply, high construction costs and population growth are expected to continue supporting rental growth over the medium term.
“Retail has entered this period of uncertainty from a position of strength,” Mr Read said.
“Supply-side constraints, population growth and improving income fundamentals remain powerful structural supports for the sector.”
The report highlights several trends shaping the year ahead, including steady yields as interest rates rise, mounting pressure on tenant margins, continued outperformance of prime centres, the growing need for logistics integration, and risks linked to underinvestment in capital expenditure.
For now, retail remains a sector with momentum, but one increasingly at the mercy of forces far beyond the shopping centre.
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