The governor’s name appears right above the signature of the secretary to the Treasury, the department which, for the past year or so, has reported in to Treasurer Josh Frydenberg. The Reserve Bank and Treasury cohabit the currency, which is easy. We are still finding out whether they can cohabit the cockpit of the Australian economy. Managing the economy intelligently to avoid a crash landing is the much harder task, especially when the two men appear to be positioning to fly the thing off in opposite directions.

Philip Lowe is here to tell us that money doesn’t just smell, it stinks. Lowe is master of Australia’s money. He controls the presses that print it. You’ll find his signature on every banknote issued since he took the job in September 2016. He doesn’t find it strange to open his wallet and see his writing on his cash – because “you don’t look at it, do you?” – though he says, “I think it’s strange for my children.” He has three, aged 15, 18 and 20.

But Lowe feels no tingle, no tantalisation. He is unimpressed by his treasuries. “You don’t want to be in there, I tell you,” says the governor of the Reserve Bank of Australia (RBA). “It’s the odour. It’s all plastics and chemicals.” When people need to visit the vault beneath the RBA’s Martin Place headquarters, staff switch on huge extractor fans to detox the air. Days in advance. The Roman emperor Vespasian gave us the saying that “money doesn’t smell”.

The idea of secret vaults of untold wealth has tantalised the human imagination for millennia. Real ones, from pharaohs’ tombs to Fort Knox, have been richly supplemented by the imaginary, from Ali Baba’s cave to Gringotts Wizarding Bank.

Philip Lowe holds the keys to not one but two of the richest vaults in the country. One is in the middle of Sydney, where thousands of city workers tread the pavements daily, oblivious to the billions below. The other, a supervault, is in the sleepy outer Melbourne suburb of Craigieburn, aboveground but anonymous, opposite an old orange juice factory. Robots manage the billions here. Red ones.

Money today may be largely electronic, yet hidden vaults of vast treasure still exist. If you were put in charge of one stacked with billions of dollars in cash, would you feel just a tingle of excitement?

That’s right. The banks pay the people to borrow money. One Danish local, financial consultant and father of two Hans Peter Christensen, opened his monthly mortgage statement one day to find that his payment was minus 0.056 per cent. The bank paid him 249 Danish kroner (about $55) for the month. “My parents said I should frame it, to prove to coming generations that this ever happened,” Christensen told the Wall Street Journal. But that was three years ago and negative mortgage rates are becoming more widespread in Denmark. House prices are soaring as a result. But it’s still an open question whether they actually promote recovery in the wider economy.

This world gets much weirder when a central bank is desperate enough to cut interest rates below zero. When this first happened after the global financial crisis, it was feared that “economies would fall into black holes”, as the Financial Times put it. “Stars would explode. Swivel-eyed extraterrestrials would appear in trading rooms.” Instead, economic theory is being rewritten since the GFC. A negative interest rate means that a depositor is guaranteed to lose money over time. It’s a measure of deep fear – the fear of losing even more money in other investments. On the other side of the ledger, borrowers are rejoicing – the interest rate on mortgages offered by a few banks in Denmark has gone negative.

It’s a world where the central bank enters the bond market and buys billions of dollars of government debt and other assets. Why? Because buying puts cash into the hands of sellers in the hope that they might spend some of it. It’s controversial because some conservatives argue that the state should not be able to finance its own debts, one arm of government buying debt from another. Yet the US, Japan and the EU have all entered this world. Lowe says this method has worked.

Lowe fears that our time is up. He’s using his power over interest rates to pull Australia back from the brink. But official rates are nearing zero per cent. Lowe is preparing the way for the eventuality that they hit zero and need to go further, into the weird world of “unconventional” measures, a world Australia has never entered.

“Business cycles don’t last forever, unless you’re Australia, where they’re in year 27 – which feels like forever,” US Federal Reserve Chair Jay Powell has quipped. The calendar has since flipped over to 28 years.

Other countries’ officials like to joke that Australia, which holds the world record for the longest economic boom of any developed nation in history, has special, mystical powers so that its good times never end.

Lowe is worried that world events are dragging Australia into an abyss. “We are experiencing a period of major political shocks. Political shocks are turning into economic shocks,” as he told the recent annual fret-session of US Federal Reserve central bankers in the mountain resort of Jackson Hole, Wyoming. Meaning the US trade war with China, the Brexit self-harm, downturns in Europe, trauma in Hong Kong.

He doesn’t court publicity and had to be convinced to be interviewed for this feature. You won’t find him anywhere on social media. He’s often not recognised and he likes it that way. And if anyone at a party asks him what he does for a living, he evades the question – he says he’s an economist, working at a bank. That’s technically true, but why dodge? “If I’m at a social event, I want to escape work. Everywhere I go, like my son’s soccer, people ask me about interest rates,” says the man who sets them.

He’s in his shirt sleeves and wearing cufflinks made from Scrabble tiles – a “P” on one wrist, an “L” on the other, a family gift. He dresses neatly, conservatively, as a central bank chief should. He speaks softly, he listens carefully, he shakes hands unselfconsciously. If not dropping his daughter at school on the way to work, he catches a bus, and sometimes a train too, from his home in Randwick, in Sydney’s eastern suburbs.

Lowe’s preferred drink is ginger and lemon tea. When I meet him in his spacious office on the hushed 12th floor of the RBA’s headquarters at the top of Martin Place, the sweeping view across Sydney Harbour to the Heads and beyond may be impressive but the governor makes no effort to awe.

If anyone at a party asks him what he does for a living, he evades the question – he says he’s an economist, working at a bank.

For a powerful man, Philip – or Phil, he doesn’t mind what you call him “as long as it’s polite” – Lowe wears his power lightly. Many people in peak positions make a studied effort to impose themselves on those around them in the way they dress, walk, speak, travel, shake hands, signal impatience.

Lowe would like some help navigating through this brave new world from Frydenberg and PM Scott Morrison. He’s frustrated that they’re not offering enough. An epic clash could be looming, testing the credibility and the powers of the Morrison government on the one hand and those of Lowe’s RBA on the other.

The board of the RBA has discretion to award the governor extra pay for performance. Lowe has let it be known they shouldn’t even try. “I said, ‘Sure, discuss my performance but there’s no point in discussing potential performance pay, because I wouldn’t accept it.’ ”

But how’s this for a novel concept – Lowe doesn’t want a pay rise. Nor even to be considered for one.

Is Lowe worth a million a year? “A million, I don’t know. Other people have to judge that,” he replies, while pointing out that his salary is set by the federal government pay-setter, the Remuneration Tribunal, not by the RBA. The basic idea is that the pay is supposed to be high enough to compete with the private sector. Does anyone ever ask him if he’s worth his pay? “No, no one’s ever been sufficiently impolite to ask,” he tells me, with just a hint of indignation.

Other public servants are paid more than the PM, too, including the Chief Justice of the High Court, the Chief of the Defence Force, and the ABC managing director. Other than the heads of some government business enterprises like Australia Post, Lowe is the highest-paid public official in the country. Incidentally, the RBA also runs a business. It invests and trades the national reserves and it’s pretty good at it – last year declaring a profit of $3.8 billion and paying $669 million of that to the federal government as a dividend.

Lowe’s RBA not only makes Australia’s cash, and the electronic version of the stuff, too – it magically makes zeros appear on bank balance sheets and voila! – but he is also paid a lot of it. Two-and-a-half times as much as Frydenberg. Indeed, at $1.02 million, Lowe’s salary is almost double that of the Prime Minister.

Yet Lowe can project force. He has an unwavering gaze when he delivers a point. He’s also developed an uncanny knack of sometimes smiling as he speaks, even when discussing a serious subject. His intelligence is his most forceful asset, and he deploys it unsparingly.

The boy who grew up as one of five children in a family that couldn’t afford to send him to university is as unpretentious as the small south-west NSW town he grew up in, Cootamundra, famed for its wattle festival, and as unassuming as its most famous son, Donald Bradman.

Of course, it would help if Lowe himself led by example. Workers at the RBA subsidiary that makes banknotes took his advice last year, and demanded a pay rise of 3.5 per cent, exactly the figure Lowe recommends that bosses pay. Yet Note Printing Australia offered only 2 per cent, the sort of level that Lowe had spent months complaining about.

Yet without higher wages to pay for people’s groceries, medical care, homes and holidays, spending is weak and the economy enfeebled. Lowe has urged governments, state and federal, to lead the way, breaking their 2.5 per cent annual limits and paying workers more.

Even behind closed doors, Lowe argues his case: “At many of the business functions I go to, business lunches, the most common topic is how they can’t find workers with the right skills. So I cheekily say, ‘Well, why don’t you pay more and poach them from another firm?’ And then I typically get a lesson: ‘Well, dear boy, you have to understand, it’s very competitive out there. We’d love to pay our workers more.’ Employers feel like there’s a lot of price competition out there, a lot of uncertainty, and they don’t want to embed a higher cost structure. And so they’re finding other ways to keep their workers happy.”

Instead of wages rising at more than 3 per cent a year, as they had in the five years to 2013, the average pay rise since has fallen to 2.2 per cent annually. After inflation, the average pay rise has been a scant 0.5 per cent. “Living standards stopped rising when the mining boom busted in 2012,” says the eminent economist Ross Garnaut. “People are grumpy about it.”

Even more shocking – the man who doesn’t want a pay rise thinks everyone else should get one. Again and again, for two years now, Lowe has urged workers to ask their bosses for a raise. And he has urged the bosses to give them one. “The crisis,” the governor announced at a conference in 2017, “is really in real wage growth.”

A banker who doesn’t want more money? Shocking. “I’m paid very well and I’m very privileged. Not many people get paid really well, get to do what they love doing – it’s really important and I work with great people, in a great organisation. So, what more could you want?”

After three months of acrimonious negotiation and industrial action, the company agreed to pay a 2.5 per cent wage rise plus some better conditions, such as five days’ domestic and family violence leave. Union officials accused Lowe of hypocrisy. “If even the people who literally print money won’t treat their workers with respect and fairness, then clearly we have to change the rules so workers can get the pay rises we deserve,” the Electrical Trades Union Victorian secretary, Troy Gray, chided. “Even the Reserve Bank won’t give workers a pay rise willingly.” Ouch.

Lowe is more active on another progressive front, however – hiring more women to join the bank’s staff of 1300 people. Thanks to his teenage daughter, as it happens. “They’d done a unit at school, obviously,” relates the father. “My daughter had been told, ‘If you have a mother or father with influence, you should ask them what they’re doing to help women.’ I remember the day – I’d had a long day – I’d picked my son up from tennis lessons, it was 8 o’clock, I hadn’t had dinner, I walked in the door and I got hit with this deep question, and I fobbed her off.

“She said, ‘That’s not good enough.’ It made me think about what we were doing, particularly the ‘demonstration effect’ ” – meaning that more women will aspire to work at the RBA and expect senior posts if there are women already doing just that.

When Lowe first related this story in a 2017 interview, it immediately attracted the contempt of Mark Latham. The former Labor leader used his position as a commentator on Sky News TV to attack the then 15-year-old Zara: “I say to the young Miss Lowe, ‘Get some interest in people unlike yourself: the disadvantaged, the poor, people who don’t grow up in the household privileged to be the daughter of the governor of the Reserve Bank of Australia.’ It’s called social justice and caring about others.”

Zara responded with spirit. “She wanted to have a joint press conference with me,” to respond to Latham, Lowe says. “She said she could stand up next to me and she could articulate why it’s important to support women, and how she has broader social vision than just promoting women.” It took Dad a few days to persuade his daughter that “it wasn’t really appropriate”, as he puts it. “Your kids keep you on your toes, don’t they? She’s quite feisty.”

The upshot? The RBA set a target that women should comprise 35 per cent of its managers, a target it hit last year. Its next target is for 50 per cent, though Lowe calls it “an ambition, not a quota”, and he’s set no deadline for achieving it. He does seem pleased to report that of the bank’s five assistant governors, three are women.

Philip Lowe's interests seem pretty banal and routine for a 58-year-old central banker. For instance, he doesn’t cook and pays no attention to food. If he can get to bed by 10pm, you’ll find him cycling around Centennial Park before dawn the next day, and he often swims at lunchtime at the city’s Cook + Phillip Park pool.

So it’s a surprise to see a pair of Aboriginal mimi sculptures towering by his office doorway; two tall, thin, timber representations of the spirit people of northern Australia. He explains their purpose: “They’re supposed to watch over you, give you inspiration and be a bit cheeky.”

These mystical beings are part of the RBA’s extensive collection of Indigenous art started by its inaugural governor, the storied public servant H.C. “Nugget” Coombs. Coombs also served as inaugural chair of the Council of Aboriginal Affairs after the 1967 referendum gave the first Australians the constitutional right to be counted as Australians. He was a passionate

advocate for Indigenous rights.

The mimis seem out of character for Lowe, but he explains that he’s a lover of Indigenous art and has his own collection at home. In fact, he’s also revived Coombs’s connection with some of the Indigenous communities of east Arnhem Land. Lowe, too, seems to have an unexpected passion.

In July, with two members of the RBA board, he visited the remote Yolngu people around Yirrkala. Coombs had his ashes divided between the Australian National University, which he helped found in 1946, and Yirrkala, which is on the far northern tip of the Northern Territory, roughly as far from Darwin as it is from Indonesia.

Coombs advocated for the traditional owners to share in the mineral wealth being extracted from a bauxite mine on their land in a landmark case. It began when the federal government appropriated some 300 square kilometres of Yolngu land without a word of consultation and gave it to a mining company, Gominco. The local people did not meekly accept, but instead wrote the famous Yirrkala bark petitions asserting their ownership of the land. It was a beginning of the long struggle to recognise Indigenous land title.

During that July trip, Lowe visited the spot where half of Coombs’s ashes are buried to commemorate the man and the connection. “I unveiled a plaque – big celebration, singing and dancing with spears and sticks, and it was fantastic, one of the funnest things I’ve done at work.” He was pleased to see that the people have used the royalties from the mine, now owned by Rio Tinto, to invest in the community. They’ve also built a future fund against the day when the mine runs out. He describes it as “not a great story, but it is a pretty good one”.

He adds, “I would like the Reserve Bank to continue the connection with people of Eastern Arnhem Land. They make sure anyone who wants employment has employment. They struggle with the downside of remoteness.” The bank encourages Indigenous graduates: “We finally flew the Aboriginal flag – too late, but we did it – and we have Indigenous graduates. We very much encourage Indigenous kids, wherever we can see people with interest in economics, finance, technology. I’m always looking for good ideas to help in economics and, drawing from my own experience, looking for people without much opportunity and giving them opportunity.”

Philip Lowe’s career began in 1980 at the RBA, where he has worked ever since.

For the young Philip Lowe, fresh out of high school, that helping hand came in the form of an RBA bursary that paid him to work at the bank part-time and study economics at Sydney’s UNSW the rest of his time. Hilariously, his parents wouldn’t let him accept the offer until they’d travelled from Cootamundra to Sydney to interview the RBA. To make sure it was worthy of their son’s talents. Other than journalists, Lowe believes, his parents are the only people ever to interview the central bank. It was 1980. He’s worked there ever since. The bank offered him many other opportunities, including the chance to study for his PhD at Massachusetts Institute of Technology (MIT).

He worries about the scope of opportunity for the young today. One fashionable fear he rejects, however, is the claim that artificial intelligence and robots represent “the death of work” for the next generation as machines displace humans. “One hundred per cent wrong,” says Lowe. “For every job that technology destroys, it creates another one at least, and it creates higher real living standards.

“I’d also point out that the jobless rates in the major Western economies today are the lowest we’ve had in 30, 40, 50 years.” (About 30 in Australia other than 2008’s record low, 40 in Britain, 50 in the US.) “Technology doesn’t destroy jobs – it creates them.”

But he adds two essential conditions. “One is the distribution of income that comes with that. Some of the new jobs are going to have much higher incomes than some of the older jobs, so there’s a transition issue” – sharply greater inequality. “The other one is that individual jobs do get destroyed by technology – new jobs are created but not necessarily for the same people, so society has to find ways to help people who lose jobs through technology to find other jobs elsewhere in the system. So if we can manage that process and somehow stop wage inequality from becoming too large, I’m confident technology will deliver higher standards of living.”

And if the political system can’t manage those two side effects? “Then society becomes unhappy and starts looking to politicians to provide solutions to that unhappiness. My observation, looking around the world, is that most of the solutions being provided aren’t very sensible.” In other words, mad populism – the kind that has taken over the White House and the prime ministerial offices and presidential mansions of half a dozen other nations but so far been held at the fringes in Australia – arrives here, too.

It’s entirely possible that new forms of power generation emerge that are not only good for the climate but improve future living standards. Philip Lowe

And while the RBA has recently named climate change as a source of “first-order economic effects”, Lowe is not despairing at the lack of progress. He recalls returning to Sydney in 1991 after studying at MIT in the US and telling his RBA manager about an exciting new communications technology called email. “Why on earth would we want that?” came the reply. Lowe had to write a business case for using email before the bank grudgingly introduced one account per department.

His point? “We had no idea 25 years ago how the world would be transformed by technology. If we can address the climate, it gives us a better chance that the next generation will have a better standard of living.” But he thinks Australia’s debate about electricity is too narrow.

“By nature I’m inherently optimistic about the ability of humans to solve problems. It’s entirely possible that new forms of power generation emerge that are not only good for the climate but improve future living standards … in ways we can’t dream about.”

Philip Lowe, photographed in the RBA’s vault in Martin Place, Sydney. Credit:Louie Douvis

So what does the governor worry about? He worries about opportunity and about inequality. He worries that Australia’s education system needs to do better to equip everyone to be able to enjoy the opportunities the country offers. And he worries that high house prices can entrench inequality from one generation to the next.

“Eventually a house gets passed to kids or grandkids, and gets passed down at high prices,” he says. “What if you come from a family that’s renting, or where the house price is not particularly high – they will find it much more difficult.”

Hold on. Aren’t you to blame? Wasn’t it the RBA, by keeping interest rates so low for so long, that created the “bubble” in house prices? “It was a contributor,” Lowe concedes, “but not a prime contributor. If you ask any first-year economics student, what’s going to happen to housing prices – we all want to live in fantastic locations by the coast, each person have a large block of land, and under-invest in transport, and allow fast population growth, please explain? I think you’re going to get high housing prices.”

The solution, he says, lies in this potent insight: “Infrastructure investment is actually the best housing policy.” How so? “There’s very little we can do to increase the supply of well-located land but there’s one thing you can do – build great transport. So we can increase the supply of well-located land through well-designed transport, public and private. If we can do that then the value of the land that each dwelling uses will be less, people will be happier, the community will be stronger, housing prices will be lower relative to income, some of the consequences for the distribution of wealth will be better.”

People started saying, ‘It looks like your banks are crooked, you’ve got all this political dysfunction, and, for a while there, your cricket team was cheating.’ Philip Lowe

But Lowe’s greatest and most urgent worry is the near future of the economy. He is recognised in public a lot more often these days compared to a few months ago. Fellow train passengers are much more likely to ask him for a selfie when he’s on his way to work. He always agrees, by the way, because he thinks it’d be rude to do otherwise.

The reason is simple. After three years without any movement in interest rates, the RBA in June and again in July decided to cut, and cut decisively. The darker the outlook, the cheaper the money. The greater the fear for the economic future, the easier Lowe wants to make it to borrow, to spend, to invest. As things turn down, Lowe wants to give you a reason to spend up.

But he knows that interest rates – monetary policy – has its limits. “Monetary policy cannot deliver medium-term growth,” Lowe told the US Federal Reserve gathering at Jackson Hole. “We risk just pushing up asset prices.” Meaning a revival of the housing bubble, as one potential side effect.

Just as he is not terribly impressed with the riches in his vaults, he’s not terribly impressed with his own powers over interest rates – alone – to rescue Australia from an international abyss. That’s why Lowe has campaigned relentlessly for the federal government to do more to generate economic activity.

“The best option,” Lowe says, is “creating an environment where firms want to innovate, invest, expand and hire people. I think that’s the best option. I’m sure at the analytical level the government would agree. The challenge they have is to develop a program to do that.”

He has repeatedly called on governments, state and federal, to invest more, much more, in infrastructure, too. Labor’s shadow treasurer Jim Chalmers remarks that Lowe’s job is “a tough gig made harder because the government won’t come to the party with helpful fiscal [budget] policy. I sense and understand the frustration he was expressing at Jackson Hole about how monetary policy’s being left to do all the work.”

But the Treasurer, Josh Frydenberg, does not acknowledge any tension. He says that the government is doing on infrastructure just what the governor wants: “His argument is that the Commonwealth and states need to have long-term, continuous pipelines of projects in construction and planning. That’s what we have.” And on budget spending: “We both see the fundamentals of the Australian economy as strong, but point out challenges ahead.” The Treasurer doesn’t want to engage. “I’m comfortable with him talking on a whole range of topics. It’s not for me to tell Phil, ‘These are the areas you can speak on.’ He’s independent.”

Philip Lowe and Treasurer Josh Frydenberg are pulling in different economic directions. Credit:AAP

But with Lowe making a concerted effort to stimulate growth by cutting rates and Frydenberg committed to delivering a budget surplus, the two great arms of policy will be pulling in opposite directions. One expanding, one contracting. The point must surely come when the government will either follow Lowe’s advice or wish he’d shut up.

Josh Frydenberg, Scott Morrison, be warned – the governor has no intention of shutting up. Asked whether he’d go quiet if the government no longer wished to hear his message, Lowe replies: “Certainly not.” No politician has suggested he should go quiet, he attests. “I wouldn’t expect that they would ever do it, partly because it’d be the wrong thing to do and also partly because they know I’d ignore it. I can only see losers out of doing that. There’s no benefit to come from that.”

The RBA is protected by its own act of Parliament. Lowe is only three years through a seven-year term. The RBA’s ultimate protection, however, may be that it has immensely higher levels of public confidence than any Parliament or politician. It is among the country’s most trusted institutions, consistently just trailing the High Court, the ABC and the police. Federal politicians, together with journalists, talkback radio hosts and used-car salesmen, populate the other end of the credibility scale.

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The contrast between an activist central bank and a complacent federal government grows ever more obvious, the economic challenge ever more urgent. Lowe worries for his country. “Up until two years ago, whenever I’d go to international meetings, people would say, ‘Can you tell me what the secret of Australia’s success is? Decades of uninterrupted economic growth and fantastic, profitable banks that survived the financial crisis, low unemployment, low and stable inflation, the mining boom. So, what’s the secret of your success?’

“Two years ago, maybe less than that, I noticed a change. People saying, ‘What’s going wrong with Australia?’ Maybe it started with the banks, particularly when the royal commission started and all these stories coming out of the bank system, so people started saying, ‘It looks like your banks are crooked, you’ve got all this political dysfunction, and, for a while there, your cricket team was cheating.’ So, I’ve had multiple conversations on this, ‘Your banks aren’t as good as you used to think, the political system is changing leaders every year, and your cricketers cheat. What is going wrong with Australia?’ ”

Not all the money in Phil Lowe’s vaults can answer that challenge.

Correction: The original version of this article stated that the Treasurer's signature was on Australian bank notes. It is in fact the signature of the secretary to the Treasury.

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