RBA governor says sorry to homebuyers who acted on rates forecast

Reserve Bank governor Philip Lowe has apologised to Australians who took out home loans based on forecasts that interest rates wouldn't spike until 2024.

The central bank forecast throughout 2021 that inflation wouldn't rise quickly and interest rates would stay low until 2024.

However, the bank began hiking the official cash rate in May and it has now risen by almost 3 per cent.

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Greens senator Nick McKim asked Lowe during an economics committee hearing today whether he owed Aussies who were "induced" to take out mortgages based on the interest rate forecast an apology.

Lowe apologised to homeowners after previously defending the bank's forecast on the grounds it included caveats.

"I'm certainly sorry if people listened to what we'd said and acted on what we'd said and now regret what they had done," he said.

"That's regrettable and I'm sorry that happened."

Lowe said the economic situation in 2020 and 2021 during the COVID-19 pandemic was "dire" which led the bank to do "everything" it could to help the country get through it.

The governor said the RBA had a strong insurance mindset during this time and was forecasting a sharp economic fall including historically high unemployment rates.

"We were talking 15 per cent unemployment, a generation of young kids not able to find jobs, people not able to go to school and university," he said.

"It was dire times and we decided to do everything we could."

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Lowe said the RBA tipped inflation to stay low and therefore interest rates would also remain low, but the economy picked up faster than predicted.

"The economy recovered much more quickly than anyone expected. We've had to raise interest rates more quickly, and people who borrowed in those two years are now finding it much more difficult."

"I'm sorry that people listened to what we've said and acted on that and now find themselves in a position they don't want to be in.

"But at the time, we thought it was the right thing to do, and I think looking back we would have chosen different language."

Lowe conceded the Reserve Bank failed to clearly communicate the possibility rates would rise sooner.

"My language was always caveated but I thought it was clear," he said.

"That's a failure on our part and we didn't communicate the caveats clearly enough."

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He said the community only heard that interest rates would stay low until 2024 instead of the "conditionality" of this statement.

It comes as the nation's cash rate currently sits at 2.85 per cent following seven consecutive rises.

Another interest rate rise is expected in December as the central bank battles rising inflation.