Luxon & Willis made GDP growth the Government's sole metric of success & bet on interest rates alone as the driver for GDP growth. That choice made true RBNZ independence impossible.
TV1 was not too bad last night, but hopefully the Opposition parties can mount a major campaign today to expose Willis, and then let the media carry it on.
And full marks to Michael Reddell in his persistence on this topic. With further digging up of Willis's views of the capital requirements for the banks, exposing us potentially to another 2008 financial meltdown, her economic credibility could be destroyed.
We, here, all agree that Willis has no credibility. What will be good to witness is the business community come to their senses, too. Perhaps even Mike Hosking????!!!
I wonder how much attention is being paid to this saga internationally. NZ holds a place in economic policy history for the formation of the independent reserve bank mandate, an example subsequently widely imitated. Hmm, now where else in the world is independent central banking also under attack…
Release if you can please Bernard! This is very important commentary - with lots of really interesting twists and turns and implications. What a motley, incompetent and dangerous crew they are.
The next question is how much can they inflate property prices before the impacts become too much. What are people willing to give up to keep their asset values high..
And more horrifyingly, how much are they willing to see those without residential land assets suffer to support their wealth.
This is deeply troubling especially when observing what is happening with the US Federal Reserve and their governors. Please release if possible Bernard. Another reason that we need to begin to create a parliament that is truely based on Te Tiriti o Waitangi.
To get re-elected at any cost is the objective of this current mess of a coalition.I say mess because this is the state of the NZ economy. And this is about to get messier with the current government doing everything within it's power to get back in the seat of power.
Did I sense a bit of raw emotion from you Bernard? That emption is warranted and is in the right place.
DTI,LVR speed limits are about to breathe their last.As also the foreign ownership ban of NZ property.
I'd be cautious about pitching the correlation between falling house prices and falling governments as causation, because
(a) a lot of other stuff drove those falls and created a lot of pain beyond house valuations, and (b) we don't need to scare politicians, any more than they already are, into pump-priming again.
Correlation is good enough for me, in this instance.
No need to issue the politicians a warning - the prospect of losing power would have this lot auctioning off grandmothers on TradeMe, their own and other people's.
"the prospect of losing power would have this lot auctioning off grandmothers" - You’re *almost* right about that, except it should be "grandkids" – grandma has probably done just fine.
Pump-priming is needed in a downturn, it's just that they all use the wrong pump, unproductive mortgage credit instead of productive government spending.
I really do hope that the housing market stays flat with the fall in interest rates. The last thing the country needs is for house prices to accelerate. In real terms Inflation adjusted), house prices are off a lot since they peaked late 2021. Lets hope it stays that way so that capital finds its way to better and more productive investments than residential property.
I also hope the next Chair and Governor of the RBNZ have the kahunas to ignore political meddling. Although you have to wonder whether whoever steps into these positions will have the ability to remain politically neutral AND to not take a lead from the politicians.
Lets also hope at the next election, the debate is about clear immigration plans and supporting infrastructure/services AND how we make productive investments in our economy leveraging our national competitive advantages.
Empirical evidence provides more support for inflation following interest rates than the converse. Monetary policy is a poor tool for counter-stabilisation. It is indirect, blunt and relies on uncertain distributional behaviour. If it has an effect, that's lagged, and it imposes penalties on regions and cohorts that may not be contributing to the price pressures. The textbook definition of inflation is ‘a continuous increase in the price level.’ This turns out to be elusive. Hence even the most sophisticated central bank research uses abstractions, the most familiar being the Consumer Price Index (CPI), a selection goods and services designed to reflect a cost of living rather than ‘the price level.’ We should also acknowledge that our governments finances work differently to how they are presented to the public, meaning most of the argument is economically illiterate as well as uninformed. Given these issues it seems to me that giving a central bank independence to control inflation using the dogma that interest rates will work is questionable at best.
I agree. A better solution to the Muldoon issue would have been to hold political leaders to account, much like company directors and workers belonging to professional bodies are. Losing an election is not a deterrent for irresponsible behaviour when that individual is can still retire with incredible benefits.
I agree Just A L, For political leaders to be irresponsible & then take kudos for their time in power when they were not doing the service job they were elected to do is dreadful. No knighthood or future benefits should accrue after such lack of care.
I have been waiting for this piece that very effectively strips any remaining gloss from the present government’s flouting of the intent of the law and of the conventions around the independence of the Reserve Bank of NZ.
That independence was defending the country from plunder on a grand scale by this purely self-interested government, which has now revealed it is pursuing re-election at any cost. - Sharon
I have a problem with all the correspondence on this article. My basic issue is that the Reserve Bank manages the rate of inflation by raising the rate of unemployment. So, having 150,000 young NZ'ers under the age of 25 not in work or training is OK according to the RB and this government? The "law and order" and "lets show them how tough we are" policies used of Boot Camps and prison sentences are disgusting and expensive. Keeping a kid in prison for a year costs over $100k pa. Think how creative it would be to have work schemes for young people in their communities. These schemes have been around for a while. My grandfather, Patrick Moore, died on one in the 1930's.
Garry, in a meeting with a senior Labour MP on Monday, I mentioned that one of the first actions the hoped for new Government must do in 2026 is reinstate in the Reserve Bank Act the clause, which Labour inserted and Willis removed, that has the Bank juggle interest rates to target BOTH inflation and unemployment. This we could collectively advocate.
Thanks Bernard. Mountain Tui has a good account of the shenanigans around Adrian Orr’s defenestration. https://substack.com/@mountaintui?r=b0jl4&utm_medium=ios&utm_source=profile. This really is a grubby crew 🤷♂️
Surely now the mainstream media will report this a little more honestly? Or am I just hoping for way too much here?
TV1 was not too bad last night, but hopefully the Opposition parties can mount a major campaign today to expose Willis, and then let the media carry it on.
That graph is quite something.. and also the exact reason why our economy is a total joke.
Corruption or Cronyism (although he is qualified...) ?
And full marks to Michael Reddell in his persistence on this topic. With further digging up of Willis's views of the capital requirements for the banks, exposing us potentially to another 2008 financial meltdown, her economic credibility could be destroyed.
What economic credibility ?
Her economic credibility ended with the first 'household budget' statement, and we've been paying the price ever since
Has been destroyed, Jim. However this government is full of zombie politicians, so I wouldn’t put it past her to pretend it hasn’t happened.
We, here, all agree that Willis has no credibility. What will be good to witness is the business community come to their senses, too. Perhaps even Mike Hosking????!!!
there is no hope for disreputable raving nutcase MH
Release pleaseASAP Bernard
Brilliant. “Trumpian” Bullies all!
Patrick Medlicott
Yep. Opened up from the start.
I wonder how much attention is being paid to this saga internationally. NZ holds a place in economic policy history for the formation of the independent reserve bank mandate, an example subsequently widely imitated. Hmm, now where else in the world is independent central banking also under attack…
Release if you can please Bernard! This is very important commentary - with lots of really interesting twists and turns and implications. What a motley, incompetent and dangerous crew they are.
Thanks. Hope you don't mind, but I've released from the start.
The next question is how much can they inflate property prices before the impacts become too much. What are people willing to give up to keep their asset values high..
And more horrifyingly, how much are they willing to see those without residential land assets suffer to support their wealth.
the impacts of inflated property prices are already "too much".
They cant, they've excavated out the foundations under the housing market with austerity
This is deeply troubling especially when observing what is happening with the US Federal Reserve and their governors. Please release if possible Bernard. Another reason that we need to begin to create a parliament that is truely based on Te Tiriti o Waitangi.
PS Bernard please thank Lynn for the cleansing photos!
took me about a minute to figure out todays photograph, and very moving it is.
it took me back to when I lived on a "sandspit" with the sea both sides for 25 years.
It is wonderful isn't it! Phone pic. Extraordinary. Lynn a star.
Ditto me
To get re-elected at any cost is the objective of this current mess of a coalition.I say mess because this is the state of the NZ economy. And this is about to get messier with the current government doing everything within it's power to get back in the seat of power.
Did I sense a bit of raw emotion from you Bernard? That emption is warranted and is in the right place.
DTI,LVR speed limits are about to breathe their last.As also the foreign ownership ban of NZ property.
All under the guise of politics.
We,the people,will pay the price.
The 2026 election is our BREXIT
I'd be cautious about pitching the correlation between falling house prices and falling governments as causation, because
(a) a lot of other stuff drove those falls and created a lot of pain beyond house valuations, and (b) we don't need to scare politicians, any more than they already are, into pump-priming again.
Correlation is good enough for me, in this instance.
No need to issue the politicians a warning - the prospect of losing power would have this lot auctioning off grandmothers on TradeMe, their own and other people's.
"the prospect of losing power would have this lot auctioning off grandmothers" - You’re *almost* right about that, except it should be "grandkids" – grandma has probably done just fine.
Pump-priming is needed in a downturn, it's just that they all use the wrong pump, unproductive mortgage credit instead of productive government spending.
Thanks, Bernard, for shining a light on the manoeuverings of our oh-so-slippery politicians.
How do these people look themselves in the mirror each morning?
Love the range of colours and textures in that pic, Lynn.
they look at themselves with pride, they think they are fantastic.
I'm afraid PM Luxon does not have a reflection in a mirror.
I really do hope that the housing market stays flat with the fall in interest rates. The last thing the country needs is for house prices to accelerate. In real terms Inflation adjusted), house prices are off a lot since they peaked late 2021. Lets hope it stays that way so that capital finds its way to better and more productive investments than residential property.
I also hope the next Chair and Governor of the RBNZ have the kahunas to ignore political meddling. Although you have to wonder whether whoever steps into these positions will have the ability to remain politically neutral AND to not take a lead from the politicians.
Lets also hope at the next election, the debate is about clear immigration plans and supporting infrastructure/services AND how we make productive investments in our economy leveraging our national competitive advantages.
Empirical evidence provides more support for inflation following interest rates than the converse. Monetary policy is a poor tool for counter-stabilisation. It is indirect, blunt and relies on uncertain distributional behaviour. If it has an effect, that's lagged, and it imposes penalties on regions and cohorts that may not be contributing to the price pressures. The textbook definition of inflation is ‘a continuous increase in the price level.’ This turns out to be elusive. Hence even the most sophisticated central bank research uses abstractions, the most familiar being the Consumer Price Index (CPI), a selection goods and services designed to reflect a cost of living rather than ‘the price level.’ We should also acknowledge that our governments finances work differently to how they are presented to the public, meaning most of the argument is economically illiterate as well as uninformed. Given these issues it seems to me that giving a central bank independence to control inflation using the dogma that interest rates will work is questionable at best.
I agree. A better solution to the Muldoon issue would have been to hold political leaders to account, much like company directors and workers belonging to professional bodies are. Losing an election is not a deterrent for irresponsible behaviour when that individual is can still retire with incredible benefits.
I agree Just A L, For political leaders to be irresponsible & then take kudos for their time in power when they were not doing the service job they were elected to do is dreadful. No knighthood or future benefits should accrue after such lack of care.
I have been waiting for this piece that very effectively strips any remaining gloss from the present government’s flouting of the intent of the law and of the conventions around the independence of the Reserve Bank of NZ.
That independence was defending the country from plunder on a grand scale by this purely self-interested government, which has now revealed it is pursuing re-election at any cost. - Sharon
I have a problem with all the correspondence on this article. My basic issue is that the Reserve Bank manages the rate of inflation by raising the rate of unemployment. So, having 150,000 young NZ'ers under the age of 25 not in work or training is OK according to the RB and this government? The "law and order" and "lets show them how tough we are" policies used of Boot Camps and prison sentences are disgusting and expensive. Keeping a kid in prison for a year costs over $100k pa. Think how creative it would be to have work schemes for young people in their communities. These schemes have been around for a while. My grandfather, Patrick Moore, died on one in the 1930's.
Here here Garry. Totally agee with you
Garry, in a meeting with a senior Labour MP on Monday, I mentioned that one of the first actions the hoped for new Government must do in 2026 is reinstate in the Reserve Bank Act the clause, which Labour inserted and Willis removed, that has the Bank juggle interest rates to target BOTH inflation and unemployment. This we could collectively advocate.
Great stuff. I hope they were listening!