Dawn chorus: RBNZ tapering QE
Bond buying down to $570m this week from $800m per week before Christmas; Labour to legislate to block local revolts against Maori wards, although it didn't include it in its manifesto
TLDR: The Reserve Bank is quietly tightening monetary policy before its February 24 Monetary Policy Statement by buying fewer bonds per week and allowing longer term interest rates to rise a bit as our economy improves and vaccine rollouts begin overseas.
Meanwhile, politicians in Australia, Britain and America have started talking again about a return to lower deficit spending, despite warnings from the IMF against premature austerity and the need to accept higher public debt levels when interest rates are so low.
In our politics, the Labour Government will legislate to stop local voters from overturning council moves to bring in Maori wards, a move likely to please councils but outrage more conservative voters, especially as Labour did not include it in its manifesto last year.
Overseas, the Reddit brigade have moved on to buying silver, pushing it to eight-year highs and there’s been a military coup in Myanmar, which New Zealand has protested against. Also, Australia looks set to start its vaccine rollout within weeks as its own vaccine factory in Melbourne ramps up to one million doses a week by the end of March, months earlier than expected.
In our political economy
RBNZ tapering: The Reserve Bank is quietly tapering its government bond buying, effectively tightening monetary policy a bit as the economy improves, but also raising questions about whether the tightening should have been formally announced before its Feb 24 Monetary Policy Statement and news conference.
On Friday the central bank announced at 2pm to domestic market participant this week’s bond buying would be $570m, down from $650m in each of the first two weeks of the year and $800m in each of the last two weeks of 2020 and for most weeks in October and November. Yesterday it bought $170m worth of bonds, including four and eight year bonds at yields of 0.448% and 0.948% respectively, up around 10 basis points from the previous week.
Maori ward law: The Government announced yesterday it would legislate to support councils wanting to bring in Maori wards, effectively overturning a current veto from ratepayers who can get a referendum to stop the creation of the wards with a petition of 5% of voters. Since 2004, only two councils out of 24 have managed to keep their Maori wards and this change would stop locals from getting rid of the Maori wards. Local Government Minister Nanaia Mahuta said LGNZ asked for the change, although Audrey Young wrote this morning Labour should have included the change, which is likely to outrage conservatives, in its manifesto last year. (NZ Herald-$$$)
Maths problem: The Ministry of Education has called in the Royal Society to review its maths curriculum and teaching after the latest Trends in International Mathematics and Science Study (TIMSS) survey found students' maths knowledge in the first year of high school was now below that in all other English-speaking countries and the lowest it has ever been. (NZ Herald-$$$)
In the global political economy
Here comes premature austerity: Politicians in Britain, America and Australia are all making noises about restraining their spending and pivoting back to austerity as vaccine rollouts begin. Republicans are pushing for Joe Biden to reduce his US$1.9t package to just$600b and the ruling Conservative Party in Britain is debating how to reduce its deficit and debt.
Australian PM Scott Morrison said in a speech yesterday his Government’s deficit spending was only temporary and he had an exit strategy. “You can’t run the Australian economy on taxpayers money forever,” he told the National Press Club in Canberra. This talk of tighter budgets is despite the IMF’s warning in its fiscal outlook on Friday against premature austerity and in favour of more relaxed fiscal frameworks during a long period of low interest rates.
Vitor Gaspar, the IMF’s head of fiscal policy, said over the weekend that although advanced economies’ public debt has doubled as a share of GDP from 60% to 120% over the past 30 years, interest payments have halved from 4% of GDP to 2%. “I believe that it’s timely to recognise that circumstances have changed in a way that justifies the rethinking of fiscal rules and fiscal frameworks,” he told the FT-$$$.
Elsewhere, Morrison said Australia would start vaccinations in a few weeks and wanted to offer everyone vaccinations by October this year. Also, Australia’s CSL has bought forward its delivery of Melbourne-manufactured AstraZeneca vaccine to the end of March from some time in the June quarter. It said it would be producing a million doses a week by the end of March. (The Australian-$$$)
Signs o’ the times news
Longer reads and listens worth your time
Pinch points: With Volkswagen, Ford and Toyota forced to halt production and idle plants because of chip shortages, Taiwan’s importance has suddenly become too big to ignore, especially with China regularly threatening to invade. (Bloomberg)
Threads worth unravelling
Have a great day
Kia kite ano
Bernard
PS: Thanks to Marc for another great pic today.
