'You don't have to keep shouting... I imagine it's been heard' - RBNZ Governor Adrian Orr on his calls for the Government to spend more to stimulate the economy

'You don't have to keep shouting... I imagine it's been heard' - RBNZ Governor Adrian Orr on his calls for the Government to spend more to stimulate the economy
Grant Robertson & Adrian Orr

Reserve Bank (RBNZ) Governor Adrian Orr has turned down the volume of his calls for the Government to spend more to help stimulate the economy.

Since the RBNZ in August made a big dent in its dwindling monetary policy ammunition by cutting interest rates by 50 basis points to 1%, Orr has been vocal about the RBNZ’s need for “friends”. In other words, fiscal policy to support monetary policy.

During the press conference following the August Official Cash Rate (OCR) review, Orr explicitly told government, businesses and households to “wake up and go and spend”.

However, the RBNZ’s Monetary Policy Committee, said in its latest Monetary Policy Statement released on Wednesday, that its members “noted that fiscal stimulus could be greater than assumed”.

Asked by interest.co.nz, in a press conference, what had happened for this assumption to change, Orr said the Bank didn’t have any “underlying information” but was essentially just noting the uncertainty around the time it takes for the Government to get its money out the door.

Indeed, the Committee said members “discussed the potential delays in implementing approved spending and investment programmes".

Asked why there seemed to be a change in tone by the RBNZ in relation to its commentary around government spending, Orr said: “You don’t have to keep shouting to the extent that it’s been repeated many many times in the press.

“I imagine that it’s been heard. We don’t have anything to add to that.

“We’ve been working through what we can do with our tools; how we’re trying to achieve our inflation projections, and fiscal policy will be stated.

“We are confident around the current policy setting. We put a little bracket there - the hope that it’s followed through on. We operate off whatever the current fiscal policy is.”

However, Orr later in the press conference pointed out that New Zealand has “well identified infrastructure demands and needs”, a “healthy” government balance sheet and low interest rates.

“This is, if needed, a time [for] fiscal spending,” he said.

“That’s not our job. They [government] will do what they do, and we’ve made our message very clear…

“Many countries have suggested that monetary policy tools may be secondary to some of the fiscal policy tools. We’re not in that position at the moment, but we always like to have friends.”

Interest.co.nz, the day before the OCR review, asked Finance Minister Grant Robertson why the Government wasn’t front-footing fiscal stimulus in the same way the RBNZ had been front-footing monetary policy stimulus.

In other words, why it isn't spending a whole lot more upfront to prevent the economy really sliding downhill, in the same way the RBNZ had pre-emptively cut the OCR by 50 points in August. It would take a while for tax cuts and/or more welfare and infrastructure spending to filter through the economy, in the same way it takes a while for lower interest rates to take effect.

Robertson responded: “My argument is that we already have. Budget 2019 included an enormous increase, relatively speaking, in both operating and capital spending. So I’d argue we already are front-footing it.

“But we continue to look for opportunities to do more.”

Robertson wouldn’t provide a definitive answer when asked what sorts of opportunities he was considering ahead of Budget 2020. He said it was about striking the right “balance” between different types of spending.

Robertson is due to publish his Budget Policy Statement on December 11, when Treasury releases its 2019 Half Year Economic and Fiscal Update. 

His self-imposed net Crown debt target of 20% of GDP remains in place until 2022, after which time it has been extended to between 15% and 25% of GDP.

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From the press conference I got the feeling that he knows there is government spending coming.

And that would be a totally rational expectation.
As I have said before, if Budget 2020 doesn't 'spend big', Labour are toast.
Even this incompetent bunch realise that, surely.
A large increase in the house building program is an obvious candidate. Will deliver much quicker results than infrastructure.

To impliment house more building they need a recession to supply the labour.

Maybe if they were on the front foot 1-2 years ago they could have tried to scale up the prefab side of things, to reduce reliance on labour…
But that would require intelligence and forward thinking....

Instead they tried to impliment CGT and Kiwi Build.

Was only months ago Labour were parading the budget surplus. Now that the economy is in hot water, they're trying to spend to keep it afloat. Too little too late. Very interesting times

Yes. They aren't very clever.
Anyone could see where things were heading - in a bad direction - 12 to 18 months ago.
Their lack of foresight will be the end of them.
Actually I take back what I say above about spending big in Budget 2020 - it's already too late.

We have been continuously kicking the can down the road the past 10-15 years, and been ultra short-termist. We need the crash to cleanse the system.

Jacinda is directly responsible for not acting on increased spending. Every man and his dog knew what was going to happen and that planning on infrastructure was needed ASAP.
Once again her lack of leadership ability is glaringly obvious.
The same with NZF if they fail to act.

Not sure if its just lack of leadership.
It's that, plus....lack of economic and strategic brains and nous.

The formation of her special committees to look at issues that Gov't employees were capable of dealing with was a slap in the face for them.
A friend of mine (who works in the MOE) met with the newly elected Nat Gov't at the start of their term. He presented them with his figures and ideas n a report as requested and commented that they could take it away and have it looked at. The newly appointed Nat minister replied 'I take it you are qualified and an expert in this field so why would I need to check your findings? This is on your head if it dose not work'.
That is the differance between National and Labour. Leadership v ass covering.

Cancelled all infrastructure projects and Saving every dime to spend big in 2020 to try and BUY the next election.

The Year of delivery has certainly hit new heights so far.

I'm already cringing at how they will choose to spend the dollars and the I help the down trodden look on Jacinda's face when she delivers the speech.

Sadly I think any assistance they supply to the down trodden will be in forms that are quickly siphoned off by those with means.

That is for real. May as well take a good percentage of it and hand it to bottle and takeaways shops.

Yes Labour has increased spending.. Wellington is awash with jobs with Jacinda's 100 plus special committee's.
Has a special committee been set up to look at the looming economic out look? If not it would be high time they got one going so the results could returned to us in two years time and then the failing to impliment process could start.

Yeah, a lot of it is the wrong kind of spending...
The first year of free tertiary education is one of the worst examples

They didn't expect to win so it was basically a ploy. The real news is that Jacinda could not actually step up and say it was a screw up and not impliment in full.

They broke every other promise, so why not this one?

They need to focus on low wage earners, not the management class.

That's at least partly what the Minimum Wage increases and the more general push for the Living Wage are all about. The facts that:

  • the real min wage is zero
  • both fiat increases are also Robot Incentive schemes
  • in private sector employment terms, ya cannae Push on a String - it's not possible to force employers to - er - Employ

seem to have escaped this sorry crew's notice.

'They need to focus on low wage earners, not the management class.'

Ha! You'd think that would be a core focus of a Labour govt!!!!

They must be swilling a lot of chardonnay down there in the crapital

You know what is SIMPLE would be to DECREASE tax.

Labour wants to increase TAX on everyone and then give it to who they think will vote for them.

You don't have to force the cost on business which is all they are doing and then pretending they have done something.

So, increase the infrastructural deficit.

And increase waiting times for medical care. Just as more of the population is reaching the point where they won't be able to afford medical insurance.

Never been able to afford medical insurance.

Labour decrease tax... good one. Yeah right.

Don't worry folks, we're small experimental Nation - JK recently visited his overlord No.1 in CCP - couple weeks/days later? - the elevation of ex. AirNZ boss (for sure it's to replace Simon), it's remind me when JK is being groomed to replace Don Brash, then their baby party 'SNZ' birth.. then the last gasp flurry to pump the breath into dying new home loan to be released by ANZ into Asians buying frenzy again, all in anticipation of next year. Just, please don't bring world event into consideration, NZ is different - we are no longer affected by any of major world event... tone it down please, hush, don't mention it. The architect of that surplus reporting have interesting things to say about it:

Can we please have the holiday season start early this year, say from 1st December and extend till end February, so all these big wig pols, economists, bankers, regulators et will shut shop and go away, leaving the economy to heal itself ?

The best thing that could come from this government is a wholesale repudiation of all neoliberia thinking and a slow but steady reboot of the economy more along the lines of a socially progressive economy that actually has a strong aspect of sustainable centralized planning to all facets of the economy so that we can have a living standard that is futureproofed not dictated by the whims of the latest thinktank experiement from the USA

The current government has neither the brains, nor the guts, nor the foresight to do any of that.
One can be critical of the actual policies of Lange's Labour Government but.... they certainly had the brains, guts and foresight to execute a vision.
There is a serious talent deficit in the government. Bunch of clowns.

The lights are on but no one is home.
Except maybe when we look at increased Govt involvement in certain areas that we can neither set expectations for or measure their effectiveness in any way.

".. centralized planning to all facets of the economy.."

What, so we need another Mao, Chavez, Mugabe, or Stalin? And start celebrating the Glorious 5-year Plan? (and supplying The Mao with Yet Another set of Dancers...)

Don't be a dick, I'm talking about a coordinated approach to running the country, some might call it a society. Neoliberia has delivered chaos and exploitation of that chaos for unfettered profit is the agenda of the day, not that it matters if its unsustainable and ultra shortsighted. Planning for the future does not mean communism ok?

Michael Reddell is scathing.

Not one of the MPC members – all of whom are probably pleasant people (even the Governor if people aren’t challenging him) – command any great respect for their insight into the economy, their judgement or intellectual leadership, or for their willingness/ability to communicate a persuasive story or a sense that they themselves have a good and robust framework for thinking about the economy.


The document itself was weak on substance, building on consistently poor (largely non-existent) communications from the Bank. You can tell that there are problems with communications when the Governor is reduced to repeating (numerous time in the parts of the press conference I saw) “we are trying to be as transparent as possible”. He isn’t seriously trying, and certainly isn’t succeeding. We’ve not yet had a serious speech on the economy and monetary policy from the Governor, after seven months we’ve heard not a word from four of the MPC members (including all the externals), background papers aren’t released even with a long lag, the MPS documents themselves offer ever-less insight or sense of how (or even whether) the MPC thinks in depth about the economy, and the Bank holds data close to its chest when it could release it more promptly (asked about this latter point yesterday the Governor did undertake to review their practice).


Um, click the URL in the first sentence. Croaking Cassandra....

thanks, couldn't see that differentiated as a link on my phone

Link is the first line.

Great website.
I just read his paper 'High house prices: A Blunder of our governments'. Excellent.