I asked Chief Economist Paul Conway why the Reserve Bank has changed its forecasts and the Official Cash Rate so much since August. His answer could have been an episode of 'When The Facts Change'.
"Government fiscal policy has helped reduce inflation" ... by inflicting unemployment on 50,000 more people is the bit they don't say. Inflation in terms of CPI is political theatre. Inflation is down but nobody is better off. Prices have continued to rise. Even if they don't this is the new price level where wages/income in real terms has fallen backwards in recent times.
The lack of direction from Gov and self destructive decisions are going to put us in a real bind.
I'm not seeing anything improve for the average kiwi though. When will that improve, when will people be able to get jobs, when will people be able afford their groceries again?
The government will have you believe their Austerity and mass redundancies are a necessary medicine, without which inflation would not be tamed. Yeah right. Look no further than Australia where inflation is running at 2.1%. They didn’t implement a huge austerity programme, they didn’t fire thousands and thousands of public servants, they didn’t tank the economy with their complete and total economic mismanagement…. https://amp.theguardian.com/australia-news/2024/nov/27/australia-inflation-rate-figures-cpi-consumer-price-index-reserve-bank In fact, inflation was always going to come down. Everything they put us through was totally unnecessary, and has got us deeper into our economic rut. The media never presents any kind of critical analysis on these things. Like why not report on the Australian inflation rate, and do some serious searching as to why the Govt acted the way it did.
They know full well it's nothing to do with it. Inflation was largely due to global supply. Inflation has reduced globally. With the fiscal chainsaw the CoC has used RBNZ is left to try and inject some life with its silly interest rate tool as an emergency response. A response Luxon and co tout as evidence of success. Financially illiterate.
Interesting. Find Paul talks very much to silver-coat all of the tricky questions as a result does not at all make his conversation interesting. All he needs to do to accomplish the mission is up interest rates, it seems. Bernard brought him back on a couple off occasions to address contrary views but to no avail.
Yeah... I was kind of thinking the same thing. Interesting conversation & insight into Paul Conway psyche.
My personal take away is that the RBNZ is purely focused only on getting inflation down... & that's it. I know that they can't comment or have input on government policy(as far as I know), but 10,000 kiwis in public services made unemployed? meh who cares as long as inflation is down(that's the vibes I got from him).
I don't know why (sorry if this is a bit personal) but I think he is a bit too self-congratulatory on getting inflation down... It has mostly been driven by global economic forces IMHO.
Great question from Bernard regarding price targeting.. but alas the response was a polite... yeah...nah from Paul.
But I still really appreciated this interview, it was fascinating.
Great question Bernard - “why can’t the RBNZ ‘look through’ govt and local govt imposed costs and the impacts of Cyclone Gabrielle?” Paul’s answer: “It’s the vibe…! People might get used to higher prices for stuff, so we need to smash the economy to squash any inflationary expectations!” (I’ve paraphrased somewhat).
Imagine if they hadn’t squashed the economy - would a ‘hard landing’ be any worse than this?
The Reserve Bank seems to live in the nominal economy (e.g. the comments towards the end about nominal wages) rather than the real economy, and real expenses per capita, per class. Which leads to the comment that about nominal wages increasing to sort of counter-balance headline inflation as a fudge for what people are really experiencing.
Where is the attention to looking at who loses/who gains from OCR changes, and asking whether it should (always) be workers who lose, as it seems to be? Should there be more use made of the household labour force cost of living surveys which give a much better picture of the differing cost of living changes to different sections of our society?
Which would then lead to integration of monetary, fiscal, employment, industrial, resource use, etc., policies, best achieved if monetary policy was returned to the Minister of Finance and this anti-democratic farce of an independent reserve bank ended.
We would also be better served if analysis from other economic schools of thought, including modern monetary theory, were provided at the same time, so we could get a better view of the alternative explanations for what is happening and of alternative policies to apply.
"Government fiscal policy has helped reduce inflation" ... by inflicting unemployment on 50,000 more people is the bit they don't say. Inflation in terms of CPI is political theatre. Inflation is down but nobody is better off. Prices have continued to rise. Even if they don't this is the new price level where wages/income in real terms has fallen backwards in recent times.
The lack of direction from Gov and self destructive decisions are going to put us in a real bind.
I'm not seeing anything improve for the average kiwi though. When will that improve, when will people be able to get jobs, when will people be able afford their groceries again?
The government will have you believe their Austerity and mass redundancies are a necessary medicine, without which inflation would not be tamed. Yeah right. Look no further than Australia where inflation is running at 2.1%. They didn’t implement a huge austerity programme, they didn’t fire thousands and thousands of public servants, they didn’t tank the economy with their complete and total economic mismanagement…. https://amp.theguardian.com/australia-news/2024/nov/27/australia-inflation-rate-figures-cpi-consumer-price-index-reserve-bank In fact, inflation was always going to come down. Everything they put us through was totally unnecessary, and has got us deeper into our economic rut. The media never presents any kind of critical analysis on these things. Like why not report on the Australian inflation rate, and do some serious searching as to why the Govt acted the way it did.
They know full well it's nothing to do with it. Inflation was largely due to global supply. Inflation has reduced globally. With the fiscal chainsaw the CoC has used RBNZ is left to try and inject some life with its silly interest rate tool as an emergency response. A response Luxon and co tout as evidence of success. Financially illiterate.
Interesting. Find Paul talks very much to silver-coat all of the tricky questions as a result does not at all make his conversation interesting. All he needs to do to accomplish the mission is up interest rates, it seems. Bernard brought him back on a couple off occasions to address contrary views but to no avail.
Yeah... I was kind of thinking the same thing. Interesting conversation & insight into Paul Conway psyche.
My personal take away is that the RBNZ is purely focused only on getting inflation down... & that's it. I know that they can't comment or have input on government policy(as far as I know), but 10,000 kiwis in public services made unemployed? meh who cares as long as inflation is down(that's the vibes I got from him).
I don't know why (sorry if this is a bit personal) but I think he is a bit too self-congratulatory on getting inflation down... It has mostly been driven by global economic forces IMHO.
Great question from Bernard regarding price targeting.. but alas the response was a polite... yeah...nah from Paul.
But I still really appreciated this interview, it was fascinating.
Great question Bernard - “why can’t the RBNZ ‘look through’ govt and local govt imposed costs and the impacts of Cyclone Gabrielle?” Paul’s answer: “It’s the vibe…! People might get used to higher prices for stuff, so we need to smash the economy to squash any inflationary expectations!” (I’ve paraphrased somewhat).
Imagine if they hadn’t squashed the economy - would a ‘hard landing’ be any worse than this?
Useful interview.
The Reserve Bank seems to live in the nominal economy (e.g. the comments towards the end about nominal wages) rather than the real economy, and real expenses per capita, per class. Which leads to the comment that about nominal wages increasing to sort of counter-balance headline inflation as a fudge for what people are really experiencing.
Where is the attention to looking at who loses/who gains from OCR changes, and asking whether it should (always) be workers who lose, as it seems to be? Should there be more use made of the household labour force cost of living surveys which give a much better picture of the differing cost of living changes to different sections of our society?
Which would then lead to integration of monetary, fiscal, employment, industrial, resource use, etc., policies, best achieved if monetary policy was returned to the Minister of Finance and this anti-democratic farce of an independent reserve bank ended.
We would also be better served if analysis from other economic schools of thought, including modern monetary theory, were provided at the same time, so we could get a better view of the alternative explanations for what is happening and of alternative policies to apply.
Well said Mate!