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Bill English takes aim at central banks for overcooking their responses to COVID-19 in fear of repeating mistakes made during the Global Financial Crisis

Bill English takes aim at central banks for overcooking their responses to COVID-19 in fear of repeating mistakes made during the Global Financial Crisis
Bill English. Waikato University.

By Jenée Tibshraeny

Former National Party Prime Minister and Finance Minister Bill English is taking aim at central banks for overcooking their responses to COVID-19.

Speaking to in an exclusive interview, after delivering a strongly-worded off-the-record speech to those at a Waikato University economics conference, English criticised governments for being too reliant on central banks.

He believed central banks, including the Reserve Bank of New Zealand (RBNZ), risked overcompensating for doing what they believed was too little following the 2008 Global Financial Crisis.

“They’re trying not to do what happened last time in 2009, but it’s a different sort of recession,” English, who was Finance Minister in 2009, said.

“The risk is that in correcting what they believe was a mistake last time, they make more mistakes this time."

English maintained there were "real risks" associated with central banks' "act big" approach. 

“Up to now they’ve talked as if there isn’t much risk in it. But actually, there will be consequences,” he said.

The RBNZ’s Monetary Policy Committee has been clear from the onset of COVID-19 it’s taking a “least regrets” approach. It believes it’s easier to cool an over-heated economy, than to try to fire up a frozen one.

In addition to cutting the Official Cash Rate to 0.25%, the Committee has launched New Zealand’s first ever quantitative easing or Large-Scale Asset Purchase Programme, worth up to $100 billion, and made up to $28 billion of cheap loans available to retail banks through its Funding for Lending Programme.

Together, these two programmes, which effectively see money created, are worth more than a third of New Zealand’s annual Gross Domestic Product (GDP).

Central banks de-risking investments

English said markets were becoming too reliant on central banks for underpinning good returns.

“You get some stress when either party doesn’t behave in ways the other one has come to expect,” English said, referring to the current situation where markets are pushing bond yields up by betting on higher inflation, all the while central banks are trying to keep yields down to ensure financial conditions remain loose and stimulatory.

English maintained the key issue was whether central banks had a “path to correction” to mitigate the consequences of their “mistakes”.

“Central banks have to make judgements that aren’t always going to be completely predictable, but they’ve got to pay close attention to what’s actually happening and less to what happened in 2010,” English said.

“The markets have to get used to the idea that part of the correction is some volatility.”

More targets = more trade-offs = less predictability

Asked whether he believed Finance Minister Grant Robertson requiring the Monetary Policy Committee to meet an employment, as well as an inflation target, contributed to its said over-activeness, English said: “It’s part of the general trend towards the belief that central banks can achieve almost anything.

“I’m not a fan of giving central banks several targets… It makes their job pretty difficult and it makes it harder to predict how they’ll behave… It sort of washes into the political issues when you’re dealing with inflation and employment and housing.”

As of March 1, Robertson is requiring the RBNZ to “assess” the impact its monetary policy settings have on the Government’s housing policy. The RBNZ has been clear this won’t change the way it sets monetary policy.

The RBNZ has been more forthcoming of a directive also issued by Robertson for it to have regard for the Government's housing policy when carrying out its job maintaining financial stability/regulating banks. 

“Sometimes politicians can get a bit too reliant on central banks,” English said.

“There are some things they [central banks] can do, and some things they’ve done pretty well. Either they or the politicians are expecting them to achieve more and more objectives - whether it’s now moving into climate change - it creates uncertainty.

“Central banks around the world now face a very complex set of trade-offs to deal with and it makes it harder to predict what they’re going to do.”

Asked about whether the RBNZ's social licence to operate risked being eroded, as independent economist Cameron Bagrie has suggested, English said the term was a bit overused. 

“It has become code for a wider and wider view of their [central banks’] influence,” he said.

“They have a legislated task and that’s what they should carry out and it’s pretty challenging.”

Government debt ‘uncomfortably high’

So if central banks play a smaller role in the economic response to COVID-19, should governments play a larger one - including by issuing more debt?

In true National Party spirit, English said no, raising concerns over New Zealand experiencing one of the largest increases in debt in the OECD.

It’s “uncomfortably high” compared to where we want it to be, English said.

Net core Crown debt sat at 31.3% of GDP as at January 31. While this is a decent increase from pre-COVID, when it fell below Robertson’s 20% target, it’s low by international standards.

Credit rating agency S&P Global Ratings recently upgraded NZ’s foreign currency credit rating to AA+ from AA, and its local currency rating to AAA from AA+, making NZ the first developed country with investment-grade debt to receive a sovereign credit rating upgrade since COVID-19 hit.

“I think the New Zealand public likes to see a government being careful about debt,” English said.

“They accept that you need to have some for good reasons. They know it’s a buffer for tougher times, so they’d expect to see a focus now on reducing the debt…

“[The Government seems] to have a zero-risk approach towards managing COVID and that’s a hard place to get out of - either for the impact on the economy or on debt.”

English said it was important for the Government to provide more clarity on its COVID-19 strategy.

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Unless CPI goes over 3% there's no overcooking going on.

The RBNZ’s Monetary Policy Committee has been clear from the onset of COVID-19 it’s taking a “least regrets” approach. It believes it’s easier to cool an over-heated economy, than to try to fire up a frozen one.

In the post WW2 period, after price controls were removed, inflation rose 18% in 1947 and 10% in 1948. And the Fed kept the 10-year pegged at 2.5% until 1951.

The Aussies are pegging the 3 yr note at 0.10% - $10,000,000 capital bank deposit to save $10,000 per annum at this rate. Are fiat currencies debased or not ?

Jenee shouldn't be giving English oxygen, unless she challenges him. He is of a bygone era - the one where we could fool ourselves growth was possible.

It wasn't, we can't, and we're past that little arrogant/ignorant hiatus.


At the contrary - he is the adult in the room . Telling that you dream of shutting him up.


One person being arrogant here. You been a finance minister powderdownkiwi?
With English’s experience especially of the GFC and currently no vested interest, his opinion is worth hearing. One can show a bit of intelligence and challenge and disagree with his opinion, however simply slagging a person off adds absolutely nothing and demonstrates a lack of intelligence.


He - and all those like him - misidentified the GFC - to the point of mis-labeling it.

It was really a 'planet cannot support growth any longer' Crisis - and all that has happened since, has made matters worse. He was so far off the planet, he had six offspring, from memory. My partner and I knew enough to limit to 2, 1 or none, and made that call 35 years ago. I doubt English understands the problem even now.

Slagging off? No, there's 10 years of comment hereabouts, and an awful lot besides.

Come back when you've read that lot and tell me whether you still think English (or Economics, for that matter) is worth giving the time of day?


Right , so anyone with 6 kids is comitting crimes against the planet and has no right to speak or be heard .
Your opinion om Marama Davidson and the party that made her their leader ? References to your 100K ravings about them ?

I think the above is the first time I haven't mentioned them in tandem on this site. And I've written to her, pointing it out.

You're the one thinks we'll mine Betelgeuse, from memory?

Your memory is faulty .. not just in this way , mind.

I wish you would focus on the issues and stop slagging at individuals.
If you did, I think more people would hear you.

Chuckle - I do both. English, in my opinion, used his position in ignorance, with arrogance, and put himself in the kitchen. We shouldn't be giving such dinosaurs oxygen.

"solid economic growth expected to average 3.1 per cent over the next five years."

I rest my case. A Pied Piper, at best, leading the children ........... into collapse, when you work it through.

And they hear me. Even if they pretend not to listen...


He was part of the Key regime that thought the only way for growth was massive immigration and ever increasing house prices.

That's a good point - I'd be keen to know his thoughts about that. Given we've moved on a bit and assuming no vested interest then the honesty juice should really be out, and he's a smart guy.

What was real GDP then? Maybe the baby boom was driving it.................................................................................................... I don't think you've looked at the numbers properly during the 1930-1950 period. As at 1941 the RB had tripled the size of it's balance sheet via QE and inflation didn't budge over 2% a year. That's with wartime inflation.


There is no Covid strategy Bill. Kindness will see us through.


It is hard to argue with the results though right?

It's amazing how many people in nuzlund forget that TJ.

I get messages from mates in Brazil/Northern Ireland/Spain and they're wishing they had our situation.


If only those countries had also decided to locate on a couple of small islands away from areas of highly dense population and major international trade routes, they too could have had a small rather than large Covid problem to deal with initially and beaten it.

They have all had various forms of lockdowns, theirs's just haven't been as comprehensive or well communicated as ours. In the UK for example pubs could open if they served a substantial meal: I am not sure Covid cares how substantial the meal is.
Boris and Trump both underestimated how bad Covid would be.

At least the UK seems to have their vaccination programme working well. My 41-year old son in London with no medical problems had his first AstraZeneca Vaccination last week and dued for the second in 8-12 weeks. I was amazed.


Is it really a good result if the working and poor class of kiwi's life situation is so degraded due to govt neglect of every issue but (arguably) covid, that they die of other preventable diseases (due to living in a car or tent and having no disposable income), increased crime, suicide, drug and alcohol abuse..because NZ is so degraded in it's singleminded " COVID is everything" mentality?

The results are far from in though, how do we open up to the world with a zero tolerance policy?

We live on an island. In the middle of nowhere.

Drawbridge up & 4 buttons to press.

Not bloody rocket science.

Financial market manipulation. Central banks doing all kinds of crazy shit. That stuff is rocket science. Though personally I think they largely making it up as they go now.

I think you mean initial results. We're like a bad zoom call - frozen on 'be Kind.' Incidentally, this craven Labour messaging paid for by central government has been exposed - the truth is it's only to those who agree with us.
Look at Australia, they've long since surpassed us, their main COVID issue was a useless Premier in Victoria who allowed a huge outbreak. States like NSW are recovering with minimal COVID spread, and they've kept their economies running. Central government have communicated a forward thinking plan.
We might have been in the best position but slow vaccine response, no true COVID recovery strategy, and creating massive debt will have us fall behind in the very near future.

"(The RBNZ) believes it’s easier to cool an over-heated economy, than to try to fire up a frozen one"
Anyone whose tried both putting out a bushfire or melting a block of freezer ice knows that answer to that.
A bushfire risks burning the whole place to the ground if it gets loose ( Bill English's point?) but a melting block of ice can be done at a pace and controllability that's far easier to manage.

Freezing to death is apparently a much better way to go than burning to death in terms of pain experienced.

Anyone with a missus knows Orr is right.

Anyone whose tried both putting out a bushfire or melting a block of freezer ice knows that answer to that.

Well you're comparing things of completely different scale, so that's a terrible analogy.


Problem is (with modern democracy) that Bill says this now, but if he were the Finance Minister or Prime Minister where you actually have influence, he'd be saying nothing.

Yip, just like Collins. All talk, no responsibility.

Yes. Like an ex-representative rugby player commenting from the sidelines. He doesn't say anything enlightening here.


Bill orchestrated this mess while Finance Minister - bit rich now for criticism from the sidelines.


As evidenced by his handling of the South Canterbury Finance bail-out.

Treasury officials were predicting South Canterbury Finance's (SCF) collapse even before SCF was approved entry to the government's extended retail deposit guarantee scheme on April 1 last year.

Crony capitalism at it's best.

Ah yes bw April fools day

touché Bill

Yes. Quite a few of the rural 'mates' balls deep in SCF. The suburban punters in Hanover didn't get the same sympathy.

"English said markets were becoming too reliant on central banks for underpinning good returns." You don't fight the Fed Bill. If they say that markets cannot price in risk they have the power to make it so without risk of consequence.

The term debt is a misleading one when referring to a government that only operates within the currency that it issues and also QE is the government repaying its debt by repurchasing its bonds at the same time. This just proves that bonds do not need to be issued in the first place and that borrowing does not finance the government as our politicians wrongly try to tell us.

He made this comment which I found curious “I think the New Zealand public likes to see a government being careful about debt,” The entire tone is about what the public perceives not whether they are right or wrong, or what is communicated as 'debt' to them. I see two implied messages in the comment, one that the public is incorrect about whether 'debt' is right or wrong, and the other that the Government could change it's message about what is 'debt'.

Anybody feeling sorry for Orr yet?

“[The Government seems] to have a zero-risk approach towards managing COVID and that’s a hard place to get out of - either for the impact on the economy or on debt.” Well said Bill English

“I think the New Zealand public likes to see a government being careful about debt,” - until NZ is fully brainwashed to believe Debt = Wealth Effect, or worse - Wellbeing *cringe*


“I think the New Zealand public likes to see a government being careful about debt,” English said.

... What about household debt?


Private sector banks are responsible for that and there is a strong, irrefutable official belief that market forces will take care of it. Until they don't. Which is nearly always the case.

As New Zealanders grapple with out-of-reach house prices, Reserve Bank Governor Adrian Orr has described it as a "first-class problem" and that the alternative is "recession or depression". Link

Boom and bust economics dogma putting Adrian Orr's best foot forward.

When house prices are $10m a piece, we have half a million kids in poverty and a million homeless, Orr will claim that we are in a golden era!


Central Banks need to be shut down, blown up, extinguished, closed.


Ludwig von Mises was on to it when he came up with the crack-up boom theory:

'As this crisis point approaches, the central bank has a choice: either to accelerate the expansion of the money supply in order to try to help businesses pay for the increasing prices and wages they are faced with and delay the recession, or to refrain from doing so at the risk of allowing some businesses to fail, asset prices to fall, and disinflation (and possibly a recession or depression) to occur. The crack-up boom occurs when central banks chooses, and sticks with, the first option. Economist Friedrich Hayek famously described this situation as like grabbing a "tiger by the tail"; once the central bank decides to accelerate the process of credit expansion and inflation in order to head off any recession risk, then it continually faces the same choice of either accelerating the process further or facing an ever greater risk of recession as distortions build in the real economy'

Central banks have decided to grab the tiger by the tail - now we will see if they get their get to keep their limbs.

Great post IO

The problem with the central banks pulling on the tiger's tail is it isnt them that the tiger rounds on...its you and me.

Exactly - and we live in a democracy and central bank OCR policies are destroying/damaging many people's futures, yet we have no way of voting for this. We are supposed to sit back and let them play god and behave like a rogue cult.

The central bank is *not* expanding the money supply - it is simply swapping a liquid financial asset (cash) for a less liquid financial asset (Govt bonds). This increases the liquidity of financial assets held by investors but it is not really expansionary - no change to the broad money supply at all. When Govts *spend* money they do increase the money supply - but their contribution is small fry compared to the amount of credit money entering the economy through bank lending to households and the private sector.

The trouble here is that we have dusty old economists advising politicians (or ex-politicians like Bill) and they literally don't understand how money works in a modern fiat economy. They are still using models that assume that money is a scarce resource (gold standard era) and that commercial banks only lend out what savers have deposited with them. Literally clueless. Lunatics running the asylum.

"English maintained the key issue was whether central banks had a “path to correction”..."

Thats a Good one


If i remember correctly, National's( English's) policy on debt/GDP prior to the 2017 election was to reduce it to 15%. In other words-austerity. Keep letting the infrastructure degrade, put a tight lid on health and eduction spending, keep selling of state housing and keep denying that there was any housing crisis.

I don't think we need any lessons on financial managenent from him.


Ah yes, what's even better is drastically increasing operating expenditure, fixing little to none of that infrastructure deficit you complained about to get elected and ending up with more debt and very little to show for it. Oh, and the people you need to pay it down now have massive household debt, which they also have to maintain as well. Definitely a recipe for success there.

Bill English's 'austerity' would have still involved actual outcomes beyond report writing and working groups. This seems to be something Labour voters are slowly figuring out, and that a huge number of people would have been better off if Bill English had been elected - the little he promised but would have actually delivered would have gone a lot further than the sweeping promises Labour made and then walked away from.

"This seems to be something Labour voters are slowly figuring out, and that a huge number of people would have been better off if Bill English had been elected" - choking on my spaghetti pizza..!

Incremental progress that actually happens is better than bait-and-switch hype that doesn't.

Half of NZ would be owned by people with Chinese sounding names if we still had National in government. But it would have been illegal and xenophobic to change the foreign buyer laws under the previous National government.

(but otherwise I more or less agree with your point).

Happy realization!

Now that he is an outsider with no vested biased interest directly and not under pressure from lobbyist or have to please anyone and being an economist is talking sense though is obvious.

Most politicans / government along with reserve banks are corrupt and overdoing support - need ventilators when in emergency but now even if their is a sneeze, government is runnning with ventilator as a result body may lose the ability to breath by itself.

Worst is yet to come, may succeed in delaying by providing more stimulus, QE..... but cannot avoid the inevitable and more the delay - Bigger the Burst.

If he would have been in government or in opposistion, his thinking would have been otherwise - as corrupt as current Jacinda government who is playing upto Mr Orr for vested interest.

Why is it that they talk senses only when they retire and not when in power and posistion to do something.

Jacinda Arden has full majority and is losing the opportunity - short term vested interest / power.


The latest US "stimulus" bill is $1.9T, that is $1900,000,000,000 which equates to about $6000 per man, woman and child....

One wonders if they have just stopped caring ....

Overcooking? Overlooking - applies to all of them.

Sad to note that a University - seat of real education and learning - still hasn't gotten to where the links I put up upthread, get to.

The US has got it right - they have recognised that monetary policy is impotent, that QE is an effective tool for holding long term interest rates down (but it is crap at stimulating anything other than share prices) and that if they want to stimulate the economy with a flat private sector they need to increase spending (and the velocity of money) through direct fiscal policy. NZ should do same - probably through living wage, welfare increases, paid apprenticeships, and major infrastructure investment.

“COLLAPSE : THE ONLY REALISTIC SCENARIO ?” — talk by Arthur Keller, 29 minutes
Terrific explanation of our predicament,

Betteridge's law of headlines: "Any headline that ends in a question mark can be answered by the word no."

Seems very fitting.

No question marks in this headline.

Systems: Overshoot and collapse

youre right

the question mark is the Issue

"B English worries the Central Banks are over doing it" Damn right they are providing far too much stimulus

Not so sure Yvil - the amount could be discussed, but it's direction is the concern. Money itself is generally not a problem, but how it is used is, often.

Billie Eilish should really stick to producing music...

The golden rule (which seems to be lost on almost all technocrats and commentators) is that institutional intervention begets more of same. As policy errors swing the outcome now too far left (!), later too far right, each attempt at corrective action to move the pendulum back in some area adds to the growing pile of unintended consequences in other areas.

Like the pressure building behind a dam with a leak, mending one leak results in the water straining the next weakest crack in the dam. Invariably the institutions end up running around like headless chickens because they are unable to deal with the complexities of the consequences their actions have created.

In the example of where we are now, the 'overcooking' by the RBNZ will cause more distortion to asset allocation, future productivity, and 'winners/losers' in the economy; and we will eventually see the social institution of money itself come under pressure, just like it will everywhere else this central bank madness is being pursued.

Looking at the choice we had in the last election its a real shame that English didn't get to lead for a while. He must be the unluckiest politician ever, he had multiple chances and still couldn't make it stick. Would rather have him now the all the Labour politicians put together. Still you get what you deserve, you voted Labour in.

In voting form should also have the option of NONE OF THE ABOVE.

The tendency across the country is that voters like to vote out the very politicians that are actually good for the collective nation. If there's a yard stick to measure country's mentality, it would be who's in power. People deserves what they get- they voted for it.

Who says they're not happy with it? Just because you're unhappy it doesn't mean the rest of the people are unhappy?

Both Nat & Lab liked to push the hard envelope of decisions, so both of them push it to RBNZ, there's no overcooking of stimulus, in fact? we read today that townies around West Coast & Queenstown badly needed tourism income. JA clearly thought SM was phishing her response to open the border - Nope, the golden standard economic response was found last year. Only third of GDP amount so far? hell, NZ can go even two third more, span until 2025 if necessary. All those towns will receive boost by end of this March. Print $ more.. !