‘They have to be held to account’: Future Fund chairman lashes RBA over rate rises

Future Fund chairman Peter Costello has lashed the Reserve Bank for misjudging the economy, saying borrowers are now facing steeper interest rate hikes because of its failure to act earlier on surging inflation.

As the $194.4 billion taxpayer-owned fund on Thursday delivered a negative return of -1.2 per cent for the year to June, Costello predicted more volatility on financial markets as central banks continue to push rates higher.

Costello argued the fund’s -1.2 per cent return, the fund’s first negative result since 2020, was a strong performance against a volatile backdrop, as he accused central banks of being too slow to raise interest rates to combat inflation.

“It’s our belief that monetary authorities, both in the US and in Australia, were caught napping,” Costello said. “With the surge in inflation.. .now the rate rises are going to have to be much more significant than would have been the case than if they’d begun to act earlier,”

Costello, a former federal treasurer in the Howard government, is also the chairman of Nine Entertainment Co, which owns The Sydney Morning Herald and The Age.

He took aim at RBA governor Philip Lowe’s past guidance that it was unlikely to lift the cash rate until 2024 and the RBA’s now-abandoned attempts to force down government bond yields.

Lowe, who has raised interest rates from 0.1 per cent to 1.85 per cent since May, has previously admitted the bank’s guidance was an “embarrassing” error. The RBA has also admitted it suffered reputational damage from some of its unconventional policies during COVID-19.

Costello acknowledged the RBA’s decisions were made during a crisis, but said central bankers should still be accountable for errors made.

“The [Reserve] Bank gave guidance, the guidance turned out to be wrong. The Bank intervened to try and produce the outcome and of course, the money that it used to intervene was wasted,” Costello said.