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?
Ross, the Reserve Bank just jacked em up 45% in a global depression. Supply issues didnt ‘suddenly’ become more relevant or glaring in 2020/21! The borders were closed! It *should have been the perfect time for FHB to get a ‘dip’ to buy. Rich folks moved money from bonds/td’s to the housing market. I saw plently of evidence of it in 2020 amongst boomer family acquaintances. A truly shocking and blatant transfer of wealth
Can you blame them? If you invest typically you balance risk vs reward. Now any person with more than 1 house is demonised. Maybe the target should be Gov policy and RBNZ?
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).
Which they’re now trying to sell..unbelievable as really banking being owned by each Givernment in each country is now up there as a security asset and should be protected as such given the economic warfare we see worldwide. ACC and Supefund are two others that have been attempted ti be raided by these corporate raiders and much the same as railways, ports and internet infrastructure should be protected as National security risks probe to “attacks”.
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.
Look at the devastation being caused for low and middle people.
The previous reserve bank governor is questioning the viability of the computer modelling used. These people live in some non connected environment where they say oops when they trash other peoples lives.
He deserves to sacked and then held accountable. He is playing politics for the owners of the Reserve Bank. He would be guilty of political manipulation, if we had an independent legal authority here.
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.
This is nice in theory but both National and Labour governments have a history of ignoring or explaining away the relevance or culpability of the findings.
If no action is taken what is the point of an independent review. As other comments here have stated, we all know what went wrong. An independent commission/review is just going to kick the political consequences down the road, as the review will be construed as "doing something".
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.
Don Brash: "The Minister of Finance appoints the directors on the board of the Reserve Bank, and the Minister of Finance appoints the Governor of the Bank. The Minister can only appoint somebody as Governor who has been nominated for that role by the board of the Bank, but the Minister can reject any number of people nominated by the board and request another nominee."
I read that as the Reserve Bank Board hold the reins, with a 5 year review period.
Michael Reddell does not have a very high opinion of the RB Board structure either:
"But apart from that once in five years activity, they’ve mostly been asleep, turning up and collecting their (rather modest) fees but mostly doing little of what they are supposed to be doing – holding successive Governors to account."
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.
Longer mortgage terms are also more normalised than they used to be. Prices have had room to rise with low interest rates and people being comfortable* paying it off over 30 years.
* left with not many alternatives other than indefinite renting
Seems short-sighted to me though. If it takes people ~10 - 15 years to pay down their student loan and put together a deposit, then commit to a 30 year mortgage, that's their entire working lives. No wiggle room left.
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?
Ross, the Reserve Bank just jacked em up 45% in a global depression. Supply issues didnt ‘suddenly’ become more relevant or glaring in 2020/21! The borders were closed! It *should have been the perfect time for FHB to get a ‘dip’ to buy. Rich folks moved money from bonds/td’s to the housing market. I saw plently of evidence of it in 2020 amongst boomer family acquaintances. A truly shocking and blatant transfer of wealth
Can you blame them? If you invest typically you balance risk vs reward. Now any person with more than 1 house is demonised. Maybe the target should be Gov policy and RBNZ?
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).
Which they’re now trying to sell..unbelievable as really banking being owned by each Givernment in each country is now up there as a security asset and should be protected as such given the economic warfare we see worldwide. ACC and Supefund are two others that have been attempted ti be raided by these corporate raiders and much the same as railways, ports and internet infrastructure should be protected as National security risks probe to “attacks”.
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
Look at the devastation being caused for low and middle people.
The previous reserve bank governor is questioning the viability of the computer modelling used. These people live in some non connected environment where they say oops when they trash other peoples lives.
Adrian promised them 2 years 😆
At the expense of the people of NZ.
If that is true...??
He deserves to sacked and then held accountable. He is playing politics for the owners of the Reserve Bank. He would be guilty of political manipulation, if we had an independent legal authority here.
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.
This is nice in theory but both National and Labour governments have a history of ignoring or explaining away the relevance or culpability of the findings.
If no action is taken what is the point of an independent review. As other comments here have stated, we all know what went wrong. An independent commission/review is just going to kick the political consequences down the road, as the review will be construed as "doing something".
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?
Don Brash: "The Minister of Finance appoints the directors on the board of the Reserve Bank, and the Minister of Finance appoints the Governor of the Bank. The Minister can only appoint somebody as Governor who has been nominated for that role by the board of the Bank, but the Minister can reject any number of people nominated by the board and request another nominee."
https://www.donbrash.com/elocal/who-owns-the-reserve-bank/
I read that as the Reserve Bank Board hold the reins, with a 5 year review period.
Michael Reddell does not have a very high opinion of the RB Board structure either:
"But apart from that once in five years activity, they’ve mostly been asleep, turning up and collecting their (rather modest) fees but mostly doing little of what they are supposed to be doing – holding successive Governors to account."
https://croakingcassandra.com/2022/06/10/a-highly-inappropriate-appointment/
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.
Longer mortgage terms are also more normalised than they used to be. Prices have had room to rise with low interest rates and people being comfortable* paying it off over 30 years.
* left with not many alternatives other than indefinite renting
Seems short-sighted to me though. If it takes people ~10 - 15 years to pay down their student loan and put together a deposit, then commit to a 30 year mortgage, that's their entire working lives. No wiggle room left.
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.