Te Pūtea Matua's review of its own performance finds a few areas it could have improved, but doesn't see the inflation, housing market and accountability failures alleged by the Opposition
Just a thought, would we be really comfortable with a construct of legislation interpreting its powers in more than a strictly narrow sense. Not because it is right to do so, but because then an unelected offical usurps the power and sovereignty of parliament.
Surely, all organs of state that are creations of legislation should always interpret their powers in the narrowest sense, and if that interpretation is insufficient then parliament should use its sovereign power to expand that power, anything else is a usurpation of the sovereignty of parliament, and is then properly subject to judicial review.
If the RBNZ mandate is too narrow, then it is not the governors job to fix it, but the government of the day. Similarly if it is too broad.
The only other agency that can make this determination would be the courts which is exactly why they are seperate.
This is basic democracy and the ensures the maintenance of the sovereignty of parliament. Inconvenient, but absolutely correct.
I would rather have officials that view their power in a narrow sense than one that views their powers to broadly. We all know where that leads .
This does not change the relevance of your arguments; just the agency that should be being looked at.
Bernard, Are you sure you are ascribing blame in the right places? As I would see it, RBNZ had little room to move between the Fed and the NZ Government, both of whom were primarily culpable for the awful situation you describe.
The world's central banks were guilty of allowing global asset prices to inflate as a consequence of their attempts to reduce economic stress. The correct response to this situation was for the NZ Government to prevent this occurring through constraints on leverage and potentially modifications to tax structures. Our institutional arrangements mean that RBNZ has only one lever : we consistently ask far too much of that single blunt instrument. Monetary policy always needs fiscal policy friends. It is very unfortunate that those friends were nowhere to be seen. Bridget.
Yep. Then it’s the role of the Reserve Bank to hang the Government out to dry. IE To say in this report that they took actions that wrecked the hopes of a generation because the Government’s won’t tax capital gains and won’t invest in infrastructure to ensure enough housing supply. But not mentioning it should be noted.
The Government is and has allowed the Reserve Bank to price gouge and profiteer of NZ tax payers. They be subsidise massive polluting corporations and private offshore banks at percentages in the hundreds that are only accessible via these Corporations to us. There services do not justify this price gouging and numerous layers of profiteering. By our own “democratic” paid for public services and institutions.It is very clear who they work for and how they’re screwing the taxpayer in multiples then depriving the public of our own rights and resources. Ultimately, we believe their bs and all get robbed and starved eventually while the banks and Govt literally take the piss out of us “To our faces ...”pleading poverty to the poorest and hardest working and most vulnerable. It beggars belief they don’t know this. Not much is “coincidence” and it’s worsened since this “independence” let loose an unelected rogues gallery into institutions meant to be keeping safe and functional public services and collective public assets paid for and worked on over generations. So another massive heist and, I agree, it’s another crime against humanity. No wonder they just have meetings and are on damage control, with lots of hyperbole, lest we all finally work it out. It’s all far worse and more corrupt than most people can even imagine.
Good summary thanks - it’s so good to hear from someone (over 40 and a homeowner) who gets it. And why National is cynically calling out the Reserve Bank? The alternative would be to criticize Labour re their lack of policies and action ie Gains Taxes to funnel the billions where they should have gone in the first place. And boy they cannot go down that track can they.
Good reading, thanks. Needs to be sent to the media with a one page summary: Labour Government complicit in worsening equity which disproportionately affects their voter base.
Orr and Robertson acknowledged this and didn’t Robertson respond when challenged ‘but at least they have jobs.’
Thanks Bernard. Appreciate you out there putting the questions to them. Orr seemed genuinely surprised to be questioned about the reserve bank's own social licence.
It's a conundrum, isn't it. Because you/we have criticised both the low interest rates and QE environment, and the crank up the interest rates reactionary environment of the present. What is the eye of the needle? Prices back to early 2020 (on its way to happening) and infrastructure building (doesn't seem to be happening).
The RB is right. It's not its job to be concerned with wealth distribution.
That's an elected government's responsibility, as I've commented before.
Government must act to reduce the harm that inevitably resulted from the RB's monetary decisions.
Labour has failed in this again.
No capital gains tax, no wealth or land tax . . they wash their hands of it, leave it to the 'independent' unelected central bank to make the hugely influential economic decisions with no input from the electorate.
Another great analysis, Bernard. The fiasco of the the $55B of Treasury bonds being sold to the trading banks & then on sold to the RBNZ gave the trading banks a huge windfall which they immediately invested into housing speculation. This could have been easily avoided. The better alternative would have been for the RBNZ to create the $55B of new money & then to deposit it into the government's working account at the RBNZ. The government could then have drawn down on the account to finance wage subsidies, vax costs, etc. but also have invested part of the $55B into a non inflationary reintroduction of the the 'social wage.' Living standards could have been lifted by: reintroducing Free tertiary education; reintroducing Full employment paying living wages; reintroducing Affordable Housing by ramping up the Housing Corp's building program & introducing rent controls; reintroducing Free GP visits & increased hospital spending; Renationalizing power & operating it on the pre 1990 non profit model; charging Windfall Taxes against Banks, Insurance cos, Petrol cos & Supermarkets to rein in monopoly price inflation; & returning ACC to its original 'no fault compensation'/ non insurance co. model, in order to increase claim settlements & reduce ACC levies. By restoring the social wage we could have used the pandemic to 'build back better', increase living standards & have kept housing affordable. What a criminally stupid option the government chose.
The question for me is more simplistic. Wealth distribution aside, surely if not officially stated the primary objective of any reserve bank is the orderly function of our markets, banking sector, currency and health of our financial system. They are independent because just like the RBE did in the UK when there government destroyed its bond market they stepped in restore stability. Here we have the exact opposite. When our housing market went gang busters. Not only did they not step in they were actually the deliberate cause of its instability in the first place. The answers we get in response is that this was actually a good thing because as the banking regulator after telling the banks they needed more capital this rampant increase in housing prices made all there balance sheets look fantastic and removed the risk of any of our banks going under. It would seem to me the problem we have here is a reverse banks with a mandate that is completely open to their choosing on any given day. I still remember putting in a submission against dropping the LVRs and getting the thanks for your input but we want to hear what our buddies at the ozzie banks think about it first. They all agreed it would be epic if we could take on way more risk generate more business on our loan books so we are going to go with that. From memory the LVRs were off for at least 1 year and it was the goverment who step in with the interest deductible rules well before the RBA did any thing at all.
Let us all remember that while it is Labour in power now and they can be blamed for the recent decisions and the way in which they acted (or failed to), they have, until recently, been the party campaigning for CGT for a long, long time. They have realised, unfortunately, that would mean an instant exit from Government at the next election and a reversal of that policy by the incoming government. Should they grow some balls anyway. Sure. But, can't we just behave like adults instead.
Until a bipartisan agreement is reached on where we see the future of this country and that a tax-driven approach to deflating the attractiveness of property as an investment class, we will get nowhere.
Brightline and interest deductibility changes have made some impact and as a homeowner (of three homes) it has some bearing on my future investment decisions. I am supporting of more clamping down as I would simply review what I do and potentially move my money elsewhere. Desired outcome reached!
The issue is this: our political PARTIES need to grow some balls and make decisions that were made many moons ago in other markets. Taxation, whether on sale and/or purchase, and any number of other non-tax levers to level up.
Thanks Bernard... a great commentary.
Just a thought, would we be really comfortable with a construct of legislation interpreting its powers in more than a strictly narrow sense. Not because it is right to do so, but because then an unelected offical usurps the power and sovereignty of parliament.
Surely, all organs of state that are creations of legislation should always interpret their powers in the narrowest sense, and if that interpretation is insufficient then parliament should use its sovereign power to expand that power, anything else is a usurpation of the sovereignty of parliament, and is then properly subject to judicial review.
If the RBNZ mandate is too narrow, then it is not the governors job to fix it, but the government of the day. Similarly if it is too broad.
The only other agency that can make this determination would be the courts which is exactly why they are seperate.
This is basic democracy and the ensures the maintenance of the sovereignty of parliament. Inconvenient, but absolutely correct.
I would rather have officials that view their power in a narrow sense than one that views their powers to broadly. We all know where that leads .
This does not change the relevance of your arguments; just the agency that should be being looked at.
Bernard, Are you sure you are ascribing blame in the right places? As I would see it, RBNZ had little room to move between the Fed and the NZ Government, both of whom were primarily culpable for the awful situation you describe.
The world's central banks were guilty of allowing global asset prices to inflate as a consequence of their attempts to reduce economic stress. The correct response to this situation was for the NZ Government to prevent this occurring through constraints on leverage and potentially modifications to tax structures. Our institutional arrangements mean that RBNZ has only one lever : we consistently ask far too much of that single blunt instrument. Monetary policy always needs fiscal policy friends. It is very unfortunate that those friends were nowhere to be seen. Bridget.
Yep. Then it’s the role of the Reserve Bank to hang the Government out to dry. IE To say in this report that they took actions that wrecked the hopes of a generation because the Government’s won’t tax capital gains and won’t invest in infrastructure to ensure enough housing supply. But not mentioning it should be noted.
The Government is and has allowed the Reserve Bank to price gouge and profiteer of NZ tax payers. They be subsidise massive polluting corporations and private offshore banks at percentages in the hundreds that are only accessible via these Corporations to us. There services do not justify this price gouging and numerous layers of profiteering. By our own “democratic” paid for public services and institutions.It is very clear who they work for and how they’re screwing the taxpayer in multiples then depriving the public of our own rights and resources. Ultimately, we believe their bs and all get robbed and starved eventually while the banks and Govt literally take the piss out of us “To our faces ...”pleading poverty to the poorest and hardest working and most vulnerable. It beggars belief they don’t know this. Not much is “coincidence” and it’s worsened since this “independence” let loose an unelected rogues gallery into institutions meant to be keeping safe and functional public services and collective public assets paid for and worked on over generations. So another massive heist and, I agree, it’s another crime against humanity. No wonder they just have meetings and are on damage control, with lots of hyperbole, lest we all finally work it out. It’s all far worse and more corrupt than most people can even imagine.
Good summary thanks - it’s so good to hear from someone (over 40 and a homeowner) who gets it. And why National is cynically calling out the Reserve Bank? The alternative would be to criticize Labour re their lack of policies and action ie Gains Taxes to funnel the billions where they should have gone in the first place. And boy they cannot go down that track can they.
Good reading, thanks. Needs to be sent to the media with a one page summary: Labour Government complicit in worsening equity which disproportionately affects their voter base.
Orr and Robertson acknowledged this and didn’t Robertson respond when challenged ‘but at least they have jobs.’
Thanks Bernard. Appreciate you out there putting the questions to them. Orr seemed genuinely surprised to be questioned about the reserve bank's own social licence.
It's a conundrum, isn't it. Because you/we have criticised both the low interest rates and QE environment, and the crank up the interest rates reactionary environment of the present. What is the eye of the needle? Prices back to early 2020 (on its way to happening) and infrastructure building (doesn't seem to be happening).
The RB is right. It's not its job to be concerned with wealth distribution.
That's an elected government's responsibility, as I've commented before.
Government must act to reduce the harm that inevitably resulted from the RB's monetary decisions.
Labour has failed in this again.
No capital gains tax, no wealth or land tax . . they wash their hands of it, leave it to the 'independent' unelected central bank to make the hugely influential economic decisions with no input from the electorate.
Another great analysis, Bernard. The fiasco of the the $55B of Treasury bonds being sold to the trading banks & then on sold to the RBNZ gave the trading banks a huge windfall which they immediately invested into housing speculation. This could have been easily avoided. The better alternative would have been for the RBNZ to create the $55B of new money & then to deposit it into the government's working account at the RBNZ. The government could then have drawn down on the account to finance wage subsidies, vax costs, etc. but also have invested part of the $55B into a non inflationary reintroduction of the the 'social wage.' Living standards could have been lifted by: reintroducing Free tertiary education; reintroducing Full employment paying living wages; reintroducing Affordable Housing by ramping up the Housing Corp's building program & introducing rent controls; reintroducing Free GP visits & increased hospital spending; Renationalizing power & operating it on the pre 1990 non profit model; charging Windfall Taxes against Banks, Insurance cos, Petrol cos & Supermarkets to rein in monopoly price inflation; & returning ACC to its original 'no fault compensation'/ non insurance co. model, in order to increase claim settlements & reduce ACC levies. By restoring the social wage we could have used the pandemic to 'build back better', increase living standards & have kept housing affordable. What a criminally stupid option the government chose.
"maximum sustainable employment"
is there a complete/thorough definition/explanation of this term anywhere?
".....servant and protector of the rentier class,....."
"That's not the accusation levelled by the Opposition...."
Of course not. In NZ the rentier class is comprised of (generally/largely)
members of the current Opposition.
The question for me is more simplistic. Wealth distribution aside, surely if not officially stated the primary objective of any reserve bank is the orderly function of our markets, banking sector, currency and health of our financial system. They are independent because just like the RBE did in the UK when there government destroyed its bond market they stepped in restore stability. Here we have the exact opposite. When our housing market went gang busters. Not only did they not step in they were actually the deliberate cause of its instability in the first place. The answers we get in response is that this was actually a good thing because as the banking regulator after telling the banks they needed more capital this rampant increase in housing prices made all there balance sheets look fantastic and removed the risk of any of our banks going under. It would seem to me the problem we have here is a reverse banks with a mandate that is completely open to their choosing on any given day. I still remember putting in a submission against dropping the LVRs and getting the thanks for your input but we want to hear what our buddies at the ozzie banks think about it first. They all agreed it would be epic if we could take on way more risk generate more business on our loan books so we are going to go with that. From memory the LVRs were off for at least 1 year and it was the goverment who step in with the interest deductible rules well before the RBA did any thing at all.
Bernard, this is a really useful and clear explanation. I wonder if this one could be one of your public ones?
Kia kaha Bernard.
Thanks for a great analysis which has stimulated such a response.
Perhaps a core problem here is a deficit in real independence of the RB Board which might have exercised more prudent oversight?
Let us all remember that while it is Labour in power now and they can be blamed for the recent decisions and the way in which they acted (or failed to), they have, until recently, been the party campaigning for CGT for a long, long time. They have realised, unfortunately, that would mean an instant exit from Government at the next election and a reversal of that policy by the incoming government. Should they grow some balls anyway. Sure. But, can't we just behave like adults instead.
Until a bipartisan agreement is reached on where we see the future of this country and that a tax-driven approach to deflating the attractiveness of property as an investment class, we will get nowhere.
Brightline and interest deductibility changes have made some impact and as a homeowner (of three homes) it has some bearing on my future investment decisions. I am supporting of more clamping down as I would simply review what I do and potentially move my money elsewhere. Desired outcome reached!
The issue is this: our political PARTIES need to grow some balls and make decisions that were made many moons ago in other markets. Taxation, whether on sale and/or purchase, and any number of other non-tax levers to level up.