46 Comments
Nov 23, 2022·edited Nov 23, 2022Liked by Bernard Hickey

Swarbrick just asked Orr about the commentary that was saying he was 'deliberately trying to engineer a recession' to which he replied "I would say that's correct".

You have to love his attitude regardless of what you think of his decisions.

Expand full comment
Nov 23, 2022Liked by Bernard Hickey

I’m sure there will be a lot of talk about the RBNZ “over-tightening”. But the policy mistakes were baked in 12+ months ago.

The RBNZ repeatedly ignored inflation warnings, and decided inflation was “transitory”. So they decided the economy was too fragile and the “least regrets policy” was to keep emergency stimulatory monetary policies in place.

During covid RBNZ put in place policies to deal with a shrinking economy and mass unemployment. When neither of these things eventuated they didn’t remove any of the stimulus.

A lot of the pain we are about to experience could have been avoided … but it needed to be done months and months ago.

Expand full comment
Nov 23, 2022Liked by Bernard Hickey

Orr has proved again that political economy is...well, political. He has deliberately left out any discussion of staggeringly high corporate profit margins, especially in the monopoly-adjacent realms of energy, grocery, and banking/financial services. By making snarky comments about fiscal policy, he has added fuel to the misconception that public sector spending is somehow to blame. The worst part of this is how he is providing ideological cover for National and ACT and virtually assuring that they will be occupying the Beehive after the next election -- guaranteeing us a minimum of three years of climate denial, class warfare, dog-whistle racism, and rampant waterborne disease.

Come on, Adrian. You are a banker by profession. You can see as clearly as your august institution's own statistics show that the increase in our money supply is nearly all driven by mortgage lending (see https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/depository-corporations-money-and-credit-aggregates and note that the current annual growth rate in broad money is only a bit more than half what it was two years ago). It's simple, because 98% of our money supply IS mortgage lending. How the government can compete with a hurricane in a candle-blowing competition is beyond anyone who can compute simple percentages.

Expand full comment

Bernard, thank you for asking the hard questions. At least it's out there. The response though... I honestly do not have enough space in my head for the eye roll that is required.

https://twitter.com/antihobbes/status/1595322786498875392?t=YToacUnWTENJwdP7y2lV3w&s=19

Expand full comment

To use a sporting analogy.

Team Transitory is competing at the FIFA World Cup and has just been thrashed 5-0 by the lowest ranked team.

Expand full comment

Kia ora Bernard, I have been catching up on your coverage on the OCR and mortgage rates (which I have been really enjoying due to your amazing ability to contextualise it). I picked up on something you said around the ability of private mortgage holders to service their loans. You previously discussed that there was considerable fear mongering around potential mortgagee sales and that in reality, people with mortgages from 2020-2021 were showing that they had the cash, or were working harder to ensure they had for the cash needed to pay those mortgages. Do you think this push by RBNZ to force a recession and asking for people to "cool their jets" is also aimed at these people burning the candle at both ends to service these mortgages? Has this announcement increased the risk profile here or is this a case of waiting to see what the banks do with their rates?

Expand full comment

Is the Reserve Bank part of what is trapping us in our low-investment, poor-infrastructure economy? With the calls today for the government also to reign in its spending, because of its claimed effects on the high inflation the RB is trying to crush, this makes it look like it will be impossible for any government to ever invest enough to overcome the massive infrastructure deficit that Bernard often talks about here. If a government tries to catch up, inflation will go up and the RB will spike the punchbowl with the OCR - causing lots more pain across the economy, scaring the government (existing or the next one) so they will spend less. That leaves us...where? Only investing tiny bits at a time, for fear of what the RB will do to stamp on any inflation raise that results, and forever living with crumbling infrastructure. So we can have tamed inflation (like most of the last 20 years), or proper infrastructure investment (like in some of the decades before that) - never both?

Expand full comment

> the committee spent more time on 75 versus 100, than they did with 50 versus 75.

😬 it must have been a pretty grim conversation. I don't envy their job.

> So it's always a complex picture. Over recent times, it's been broadly neutral if not, if not slightly negative fiscal impulse. Looking forward we see a risk to the upside. Because of the cyclical place we're in at the moment.

When he said "the cyclical place we're in" did he mean Governments tend to promise more spending in election years? Or did he mean Governments usually spend more during recessions?

Expand full comment

This comment summs up the mess:

https://twitter.com/hcirePT/status/1595518901152288768?t=K2y-e-6GuQ-JLaVMpQECLA&s=19

Are we witnessing the complete meltdown of neoliberal economic theory combined with financiers having no clue what to do?

Sack the lot of them. I'm sure that will have an effect on inflation.

Expand full comment

Just need to add. When the neoliberals were wrecking everything I cared about, including my career in health, back in the late 80's/90's I spotted a wee notice pinned on the board with everything else behind the receptionist at my local medical centre. Gave me my first smile for ages - " The beatings will continue until morale improves." I was not alone. I'm so angry that we have not go out of that still

Expand full comment

The Central Banks have no limits or humanity. They’ve always been happy to find both sides of wars as long as it makes them money. They have more power to make lives miserable for people or kill them than people have ever realised. All for nothing. Agree the windfall taxes for those who have profited off the assets of the people need to be targeted for this not the unpaid (women and children) poor and middle classes. He’s off my Christmas card list now and sounded like a silly, entitled, privileged old fat fart yesterday. Not persuasive just facetious, aggressive, arrogant and nasty. He’s punching down instead of working on themselves and the culprits profiteering.

As an aside David Bennett made some good and very clear points about the problems with three waters yesterday in Parliament which will serve National well next election (it’s asset stripping) clear and simple. Labour have tied themselves up in knots and yesterday just made that worse.

Expand full comment

Basically not only are they coming for your income (taxed at $15k more pa per household due to bracket creep, they are now making your houses more unaffordable which will cause more social problems, and also using womens labour twice or more over in sweat equity and unpaid contributions then charging or forcing daycare and secondary work on women more social difficulties for kids.It’s flying like a dog. On top of that public services and law and order has failed in a crisis )they’re also trying to ignore). Umtimately that’s how fragile the system is and why it needs reform. Those really big players who made a lot from covid and public subsidies need to cough it back up now. The covid payments should always have gone to individuals to avoid this.

Expand full comment

One thing is for certain, not EVERY decision is made with a lens of "what's best for housing."

Expand full comment

We really do need an online open source modern digital version of the Moniac

https://www.youtube.com/watch?v=rAZavOcEnLg

https://thekaka.substack.com/p/dawn-chorus-climate-fund-agreed/comment/10607237

The Phillips Machine ( MONIAC ) - Demonstrated by Professor Allan McRobie

Faculty of Economics, University of Cambridge

https://www.youtube.com/watch?v=gkNaZJmii28

Expand full comment

Tony Alexander: What the rate hike means for house prices

https://www.oneroof.co.nz/news/42687

Expand full comment
Nov 24, 2022·edited Nov 24, 2022

I guess looking on the bright side, recession = lower emissions...so that's a bonus. Also, less landfill :)

I read this gem of a paragraph in a Dr Tim Morgan blog post this week, seem appropriate to share here.

"In a descriptive rather than a pejorative sense, the modern economy is a dissipative landfill system. Energy is used to convert raw materials into products, of which the vast majority are quickly relinquished, generally into landfill. This is a dissipative process because it operates by converting dense or concentrated energy into diffuse forms, essentially waste heat which, in a carbon-based economy, includes climate-harming gases."

https://surplusenergyeconomics.wordpress.com/2022/11/22/243-the-great-inflexion/

Expand full comment