Former Reserve Bank Governor Graeme Wheeler accuses central banks, including ours, of hubris over failure to control inflation expectations and calls for proper reviews to rebuild trust
I agree with the need for a review, but don't you think the momentum against the RB is likely to be regressive in terms of efforts to deal with housing affordability, climate change, and child poverty reduction?
Would definitely back an independent review with a mandate to (1) identify / quantify the wealth inequities which clearly ensued from the RBNZ's QE at the start of the pandemic and (2) recommend a set of windfall redistribution rules to set it right, like you covered yesterday.
(But don't put these through an indirect tax laundry: identify each individual winner, each individual loser according to a clear set of transparent rules and create a standalone fund which directly one-off redistributes the gains to every citizen, business and eligible organisation).
The state data infrastructure pretty much exists to do this now. If they kept the rules simple in theory this could be done before the election next year...although which government wants a big IT project in election year, natch...?
(This could also be the first deployment of the mooted Aotearoa Tara digital currency account as well if "state bank account for all" was legislated and Kiwibank actually fulfilled its purpose as a state-owned bank).
Did you not just recently produce an in depth article analyzing the cause of inflation, and identifying the root cause to be the housing market, caused by poor management of successive governments, with this present regime being the most irresponsible of all.
As an exporting manufacturer and talking with peers, we noticed the ratcheting up of prices from international suppliers for no good reason, starting in mid 2021. There is international gouging going on, a wealth transfer out of NZ and other countries.
There is no need for a review, all is plain to see for those that have the intestinal fortitude to look. A review just kicks the responsibility of dealing with the idiocy of the current government and bureaucracy (regime) down the road. The spending was heavily influenced by the minster of finance. Robertson is not Orr's boss, they attempt to work together. And did you get a response as to why the government is lending so much cheap money to the large banks ? Its still going on.
Hi Bernard, thanks for qualifying the thinktank "The NZ Initiative". All too often the various thinktanks get quoted in the media without any indication of their "perspective" (or should I say "bias"?)
BTW, in your opinion where do the NZ Initiative sit on the neo-liberal spectrum?
Is it useful to join a chorus created by previous officeholders whose terms included harsh consequences for some in the population hence the decision to balance inflation and employment among other things? A review of the strategies available to the RBNZ is overdue and, as you've pointed out, needs to include the role of private banks and the management of public 'debt'. In addition any postmortem needs to include the very unusual circumstances created by the decision to use 'lock downs' to contain infection and the possibility the present Governor has values that differ from those of predecessors but aligned with the ethics of public service.
so this is fairly ample evidence that they will never admit mistakes, apply humility, or act like SERVANTS of the public, whilst in office? The ‘lips are sealed’ or ‘solidarity in (bad) numbers’ approach continues to somehow be operational procedure at these too big too touch govt inequality machines.
Back in the good old days (pre GFC) the OCR was running at up to 8%. Since then it peaked in 2015 at 3.5%.
It seems to me that people have adapted to this new normal of cheap money and can't adjust to OCR rates rising to levels that are still well below half the old normal.
Higher interest rates on that mortgage wouldn't be so tough if you had a $500,000 mortgage instead of $800,000 because the housing market went loony. Or businesses taking on cheap debt to make higher payouts to shareholders. Or governments borrowing cheap to spend money that isn't investing in our future.
Last time I looked it was elected governments not Reserve Banks supposedly responsible for economic management. Have just read Jayati Ghosh, in Social Europe piece. Spot on.
I think it is reasonable to criticise the reserve bank industry, but need to acknowledge that the RBNZ out performed their peers in BoE, RBA, Fed. Less M3 expansion, starting tightening earlier. I hope when the govt changes and we are allowed to have a royal commission into the pandemic, the other options will be properly assessed.
Fair point. The impetus for the Governor's oft mentioned 'additional monetary policy tools' probably has to come from beyond the inner circle of commentators.
I agree with the need for a review, but don't you think the momentum against the RB is likely to be regressive in terms of efforts to deal with housing affordability, climate change, and child poverty reduction?
Would definitely back an independent review with a mandate to (1) identify / quantify the wealth inequities which clearly ensued from the RBNZ's QE at the start of the pandemic and (2) recommend a set of windfall redistribution rules to set it right, like you covered yesterday.
(But don't put these through an indirect tax laundry: identify each individual winner, each individual loser according to a clear set of transparent rules and create a standalone fund which directly one-off redistributes the gains to every citizen, business and eligible organisation).
The state data infrastructure pretty much exists to do this now. If they kept the rules simple in theory this could be done before the election next year...although which government wants a big IT project in election year, natch...?
(This could also be the first deployment of the mooted Aotearoa Tara digital currency account as well if "state bank account for all" was legislated and Kiwibank actually fulfilled its purpose as a state-owned bank).
Bernard
Did you not just recently produce an in depth article analyzing the cause of inflation, and identifying the root cause to be the housing market, caused by poor management of successive governments, with this present regime being the most irresponsible of all.
As an exporting manufacturer and talking with peers, we noticed the ratcheting up of prices from international suppliers for no good reason, starting in mid 2021. There is international gouging going on, a wealth transfer out of NZ and other countries.
There is no need for a review, all is plain to see for those that have the intestinal fortitude to look. A review just kicks the responsibility of dealing with the idiocy of the current government and bureaucracy (regime) down the road. The spending was heavily influenced by the minster of finance. Robertson is not Orr's boss, they attempt to work together. And did you get a response as to why the government is lending so much cheap money to the large banks ? Its still going on.
Regards
Hi Bernard, thanks for qualifying the thinktank "The NZ Initiative". All too often the various thinktanks get quoted in the media without any indication of their "perspective" (or should I say "bias"?)
BTW, in your opinion where do the NZ Initiative sit on the neo-liberal spectrum?
Thanks.
Is it useful to join a chorus created by previous officeholders whose terms included harsh consequences for some in the population hence the decision to balance inflation and employment among other things? A review of the strategies available to the RBNZ is overdue and, as you've pointed out, needs to include the role of private banks and the management of public 'debt'. In addition any postmortem needs to include the very unusual circumstances created by the decision to use 'lock downs' to contain infection and the possibility the present Governor has values that differ from those of predecessors but aligned with the ethics of public service.
so this is fairly ample evidence that they will never admit mistakes, apply humility, or act like SERVANTS of the public, whilst in office? The ‘lips are sealed’ or ‘solidarity in (bad) numbers’ approach continues to somehow be operational procedure at these too big too touch govt inequality machines.
How on earth does Orr get fired?
Back in the good old days (pre GFC) the OCR was running at up to 8%. Since then it peaked in 2015 at 3.5%.
It seems to me that people have adapted to this new normal of cheap money and can't adjust to OCR rates rising to levels that are still well below half the old normal.
Higher interest rates on that mortgage wouldn't be so tough if you had a $500,000 mortgage instead of $800,000 because the housing market went loony. Or businesses taking on cheap debt to make higher payouts to shareholders. Or governments borrowing cheap to spend money that isn't investing in our future.
Last time I looked it was elected governments not Reserve Banks supposedly responsible for economic management. Have just read Jayati Ghosh, in Social Europe piece. Spot on.
Hi Bernard,
Do you think the cost of Foot and Mouth disease would really be the $10b mentioned? Seems to be low to me!
I think it is reasonable to criticise the reserve bank industry, but need to acknowledge that the RBNZ out performed their peers in BoE, RBA, Fed. Less M3 expansion, starting tightening earlier. I hope when the govt changes and we are allowed to have a royal commission into the pandemic, the other options will be properly assessed.
Fair point. The impetus for the Governor's oft mentioned 'additional monetary policy tools' probably has to come from beyond the inner circle of commentators.