David Hargreaves says the Government's supposed year of delivery has been a non-starter. But key decisions in the final two months of the year may set the tone for the economy in 2020

David Hargreaves says the Government's supposed year of delivery has been a non-starter. But key decisions in the final two months of the year may set the tone for the economy in 2020
A touch of magic? The economy looks in need of someone pulling a rabbit out of the hat for next year.

Oh dear. This year is disappearing at break-neck speed. Where has it gone?

Indeed, it must all be going too quickly for a Government that promised us the 'year of delivery'. Oh, how they must be regretting that promise.

From where I'm looking it seems like the Government's delivery van must have broken down. Or it got lost. No delivery. No goodies. No shot in the arm for the economy.

It is not just the Government watching the days of 2019 disappearing with indecent rapidity at the moment though. These are very busy times for the people at the Reserve Bank.

This has been their own kind of 'year of delivery'. They have had some big things to front up on - not least the proposals for banks to carry more capital. And they still have much to do before the end of 2019.

Done and dusted

So, while the course of this year is close to done and dusted, there's decisions still to be made before Christmas that might have an outsized impact on next year.

And in that respect, my mentioning of the Reserve Bank and the Government in the same breath is no coincidence.

The paths of the two are becoming increasingly intertwined. This is an interesting development, particularly when the much discussed 'independence' of the RBNZ from government is considered. There have been mutterings in the village from some quarters that the RBNZ is moving closer toward doing Government-type things. 

However, New Zealand is not alone in seeing such an intertwining.

The expanding role of central banks

Conventional monetary policy around the globe is reaching the end of what now looks a very short rope. As interest rates head for zero and even below, then so-called 'unconventional' monetary policies, such as quantitative easing come into view. And central banks are looking increasingly to their governments for fiscal support.

We haven't got the unconventional monetary policies here (yet). But in Adrian Orr we've got a Reserve Bank Governor who has already been asking Finance Minister Grant Robertson for fiscal support. In other words: 'Grant, old mate, loosen the purse strings a bit, let's get this economy rolling.'

Minister Robertson is to this point, however, keeping his powder dry.

That's not to say that things might not be on the move soon though.

As I suggested in a recent column, the RBNZ may yet provide some stimulus of its own by announcing relaxation of the limits on high loan to value ratio (LVR) lending when it releases its next Financial Stability Report on November 27. 

A capital decision

The Financial Stability Report release will be followed, apparently in the first week of December, by that much anticipated final decision from the RBNZ on the proposals for banks to hold more capital.

The whole bank capital thing has become uncomfortably confrontational, as a recent speech by RBNZ Governor Orr demonstrated. I have previously criticised the way, particularly the big four banks have pushed back on the capital proposals. 

I had earlier thought the whole thing was a bit of position-taking posturing (particularly from the banks) that would eventually be sorted out uneventfully. Instead battle lines appear to have hardened. So, now I'm less sure we will get a happy resolution. 

The Government's going to be very much more than mildly interested in what the RBNZ finally comes up with. Make no mistake, the RBNZ's decision could have a big bearing on what happens in the economy here next year. 

Keep lending, please

At a time when the Government wants people and businesses to spend and invest, it doesn't want stroppy banks pulling back on lending to defend their own capital positions - as has been the threat.

Whether the banks would in any case do that, and whether it would serve them well in the long term, well, we would have to wait and see.

But it all provides a lot of room for uncertainty. And uncertainty is never good for business and the economy. And business confidence is currently dragging on the ground in any case.

Before Christmas the Government gets one last major say for the year on economic matters through the Half Year Economic and Fiscal Update (HYFU). This is the Government's big economic sign-off for the year, in effect.

The date hasn't been announced yet, but the HYFU tends to be released in the second week of December. So this year's HYFU will likely follow hot on the heels of the RBNZ's bank capital decision. Which could be interesting.

We may need a pick-up

If the RBNZ does indeed hold firm and does go ahead with reasonably tough new capital requirements, and if the banks do react to that with some tough posturing, then everybody might be in need of a bit of a pick-up.

So, would the Government be tempted (finally) to use the HYFU as a chance to portend some fiscal goodies next year?

The 'year of delivery' has seen this Government look increasingly lost.

For me the Government stand-outs this year - and not in a good way - have been the abandonment of KiwiBuild, the flipflop on migration and the poor handling of sexual misconduct allegations within the Labour Party.

I reckon these three things taken together - cumulative impact, if you will - would have been key influences in the sharp drop in Labour's standing in the latest opinion polls.

The KiwiBuild and migration U-turns were a government doing the opposite of what it told its voters it would do. That really ticks people off. The poor handling of the internal Labour misconduct allegations was just a really bad look and is the sort of thing people remember. Taken together the impact of all these things is a loss of support.

So, the year of delivery has really been something of a write-off for the Government. It's faced with an increasingly stodgy economy and plummeting business confidence and an electorate wondering where the 'delivery' is. 

It means that the closing weeks of the year are actually going to be very important scene setters for next year - which is after all election year.

Peace may break out

If peace breaks out between the big banks and the Reserve Bank this will obviously be helpful for sentiment. Likewise, if the RBNZ does relax the LVRs that might be helpful too. 

But if the RBNZ does hold its line with the banks (IE imposing very big capital requirements) and the banks do react with threats (even implied) of capital rationing for businesses and home buyers, well...not so good.

And in those circumstances some word of increased fiscal stimulus from the Government becomes not so much a 'nice-to-do' - but probably a 'must-do'. 

Starting the new year with even lower levels of business confidence and with signs of further slowdowns in business activity will not be good news for the economy.

And it sure as heck won't be good news for a Government facing an election in a matter of months. 

This has been the year of non-delivery.

The closing weeks of the year might, however, prove very important in setting up the country for the New Year. And that could be in a good way or a bad way.

The Government can, in effect, say, "sorry the van broke down this year - your delivery will start right after Christmas". And I think it needs to.

I think something substantial is now necessary from the Government before everybody disappears for the summer hols. Leave it to February/March and it might be too late.  

Time for a little economic magic now.

Time to pull that rabbit out of the hat. If anybody knows where it is.

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If you look around the world you can see the effect of CB policy. Artificial low interest rates have resulted in asset bubbles, stolen opportunities and left a lot of disaffected youth with poor outcomes, topped off by record immigration and low wages
The list today is France,Spain, Hong King, Ecuador and Chile, we all know we are going to be adding to the list. The narrative is being taken over by social media, Govt's are losing control, people can see the b/s.
The winds of change are starting to blow.

Exactly right.


... as for NZ ... we have precious little of this " cheap " money going into much needed infrastructure projects , to improve our nation's productivity .... successive governments have been excessively prudent ...

The private sector has picked up the slack , and borrowed $ 200 billion to pump up a housing bubble ...
... who bails out who , if the bubble pops ?


I don't think we can lump us and all those countries in to the same category. Very different demographic profiles.
Our issues are nowhere as bad, although are arguably heading in their direction.
I think we'll muddle through in mediocre way over coming years. Things will get worse, but only gradually.
It might be 5-10 years before we really realise how f$%%ed things are.

Then, I think we'll shift left. Because it will be in the interests of the majority to do so.


The country already voted to shift left. But the Wellington public service is so bent on clipping the ticket they've forgotten how to deliver anything meaningful and we're effectively going backwards as a result. We might finally get some action on housing now that it's affect Wellingtonians but they have been MIA on delivering promised land, transport and labour reform. They just don't know how.

By the time that show is on the road we will be in a slow down and no one will be buying houses.
Yes the demand will still be there but the money is tighting up.

Yep they are useless. Having said that, who knows there might be a bit more talent around on the left in 5-10 years.

National is adding tallent, don't think Labour or the Greens will. They are still dragging tho old boys and girls out.


National is able to attract talent from the private sector. Labour will struggle to do that.
This current government has the biggest talent deficit of any I can remember.

Labour had 9 years after Helen Clark to get their act together ... but wasted most of that time in faction fighting , and in backstabbing their successive leaders .. no policies developed ..

.. as bad as Simian Bridges is ... the Gnats have stuck to their guns behind him ....

He'll be shot in the back and dumped into the gutter if he loses in 2020 ...

Good points.
Labour has stripped itself of talent from in fighting over many years. Cunliffe, Shearer etc were all pretty solid.

Who is National attracting? Just Luxon, another businessman who wants to be PM?

John Key left a similar void of talent as Helen Clark did.

.. and Mark Richardson .. former demon batter of the Crap Cats Cricket team ...

Crikey. That's rough. So much for burgeoning talent.

The year of delivery has crashed into the wall of business resistance. Pretty much all the issues negatively affecting Nz are in my view due to business having far far too much influence over policy settings. From tax to transport to housing to health its all dictated by business interests coming first, and that has to change or nothing else will.


The year of delivery crashed because they're incapable of actually delivering anything and their promises weren't realistic to begin with. 100,000 houses in Auckland at the campaign price-point without Day One land or RMA reform? NZTA allowing a half-pitch to derail the entire Light Rail project in Auckland? Migration reform that every coalition/support party campaigned on?

Plus, whether you like it or not, businesses create jobs, not the government. Any government that promises 'more jobs' is really promising to provide an environment where businesses feel comfortable hiring people, and that is clearly not something the Government is interested in. Even their 'working group' for business confidence was just a taxpayer lunch for the big end of town. The whole campaign and subsequent government has just been about generating headlines over substance, and the polls show people are wising up to it.

That's a good point.
While I think the government are incompetent, whether we are talking about the economy or something else, one does wonder about all these survey results.
Maybe there is a place for business to feel gloomy because they have had things far too much their way for too long?
BTW, does anyone else feel like the economic tide is really starting to change? Hearing more and more bad news stories in business, the most recent example being Media works.


.. definitely going quiet this year ... where I work we're not replacing anyone who leaves , not employing casuals ... shipments to Australia have slowed dramatically as our wages costs have shot up , and cost of production materials escalated ...

A pervading sense of fear and distrust of this coalition government ...

History shows we will have a resession, there are no new tools or smarter people to get over / arround this.
Labour, the Greens and NZF are useless at getting anything done, which creates uncertianty for the future no matrer how low the interest rates go.
Banks are tighting up on borrowing for commercial properties and word on the street is residentual next year.
We are heading into very terbulant water and no one has any faith in the people at the helm.
Any attemps by Labour to push some money into the economy are most likely going to be useless and slow to implement unless they can pull some unknown off the back benches that can deliver.

I think it's a lot more than an incompetent govt, although that's definitely a part of it.
There has been a collective race to the bottom on many areas of business in NZ and that was never going to be sustainable, despite the efforts of the previous government to suppress wages and workers' rights. It's all catching up with us now.

No one at the helm with a clue of what to do is impacting hard.

Similar things happening in construction and development. But most of the issues are bugger all to do with the government.
Escalating costs is a biggie, especially when the ability to pass on those costs in a stagnant housing market is gone.
A lot of the problems are cyclical.
I expect some hard economic times in the coming year.

Mediaworks/tv3 have been in trouble since day one, more or less.

Agree. But the modern economy isn't helping.
They have a younger, more liberal viewer base, many of whom are probably doing the Netflix thing these days. And once again we see the issue of a small market.

. .. too much debt taken on by the parent company when they bought TV3 ...

Nevertheless , Winston Peter's comment " good riddance to them " was cruel , nasty stuff ...

... we need competition for fat lazy old tax payer funded TVNZ ...

Yeah, my impression from everything I've been able to find so far suggests that Ironbridge's approach coupled with bad timing of the GFC, then Mark Weldon's management approach, have basically been the factors that sent the ship on its sinking course.


In my view the poor me section of NZ have way too much influence over policy setting.
Bussiness wants to drag us forward the other group makes noise to drag them up but most of the time it's a drag down effect.


... if I was PM for a day , I'd scrap WFF , student interest free loans , and free fees .. . Tear up the no offshore gas exploration policy . .

Re-jig the PAYE tax thresholds , pile extra money into early childhood and primary schools ... restart the roads of national significance infrastructure ....

... sack Trevor Mallard as speaker of the house ..

Head off to the pub , that Gummster deserves a beer !

Bloody hell you need that beer alright. That is 2/3's of a terms work for this crew.

Use half the extra budget to buy gold as a safety net.

... not many people know this .... but of all the gold ever mined on the planet , around 1 % of that came out of NZ ! ... nearly 1000 tonnes to date ... and we still produce about 360 000 ounces annually ... 10 tonnes . ....

Gov't's all over the world buying up at present and we have zip in the pocket.

I would call an early election as it is clear the current Gov't hasnt got a clue espically the Greens and for the good of the country someone who can run the counrty is needed.

Not sure the outcome would be any different. National are still despised by a huge proportion of the electorate. They haven't given me any reason to vote for them over the current lot. We have two major parties and both are complete rubbish.

Who would you vote for today Pragmatist?
If you got an additional $50 pw from National in tax cuts, would you vote for them?
I would, only because Labour have shown they are hopeless. Given both are crap, I will choose the party that my family and I benefit from the most.

Yeah, i'm starting to get a bit over the system, and thinking screw the rest, look after #1. But I'd have to look twice at Nationals policy package, because while they'd make a huge noise about the $50/week extra in my hand, I'd be on the look out for the policy that they'd slide in quietly that would end up costing me more in other ways.

I’d completely overturn our present day education system. Look at how Finland educate their kids. Would also appoint Sir Ken Robinson as a special educational adviser. Have you seen his TED talks? They have millions of views

That's why your not PM ..old white man policies

C'mon - that old white man Trev deserves to be sacked. If he was going to achieve something he would have done so by now.

You'd never get elected with those policies Gummy.. You think business owners , boomers and Gen Xers want to pay for their own employees/kids education? And businesses want to pay a wage that means a family can live on a couple of minimum wage incomes? Hahaha, good joke.

.. I reckon all those bribes Labour has given to buy adult students votes ought to be invested in children ... getting preschoolers and primary age kids off to a good start ...

18 , 19 or 20 year olds are big enough to sort out their own finances .... 3 to 13 year olds aren't ...

Ah, so more WFF types handout for the breeders? great, just what we need.

The government delivery truck is no longer fit for purpose .......... has run out of Warrant of fitness , the COF has not been renewed , the licence expires in 2020, and the fuel levy has made it too costly to run

It needs to be replaced

Well, the ABs look pretty good. If we win the Cup, expect the housing market to boom. If we don't win, another excuse for the market not picking up...

. . spare a thought for grief stricken Irish rugby fans who were told by national beer icon Guinness to have a Carlsberg after the match .... they'd seen enough black stuff for one day . .. haaaa de hàaaaa .. . deeper in defeat than a Jamaican chiropodist ...

Labour has def let down on the promises front they now seem lost and have resorted to carrying on with Nationals fake let's bring in 60000 immigrants a year to keep the figures looking good.House prices are now looking very risky especially in the regional areas so much so I have sold this year.
Time will tell if I am right on risk of big correction

... time will tell if the grand experiment by central bankers to cure a global financial crisis created by excessive liquidity by a greater level of liquidity works or blows up again ....

I got my opinion on the eventual outcome : POP ... POP POP POP POP .... lotsa bubbles bursting .

“Fiscal stimulus” is the proposition that by borrowing money and spending it, the government can raise the overall state of the economy, raising output and lowering unemployment. Can it work? Do the arguments for it make any sense? If so, does the economy suffer from the ailments that fiscal stimulus can cure?

This is perhaps the only prediction that is utterly uncontroversial among economists. It is a standard last-resort economic prescription to avoid a deflation.

Conventional monetary policy just exchanges treasury debt for money, without increasing the overall supply of money and debt. Whatever arguments there are that this action might affect overall demand for goods and services vanish when interest rates are near zero as they are now. Now, Treasury debt and money are nearly perfect substitutes. To inflate, the government needs to increase the overall quantity of government debt, not alter its composition.

To inflate, the government also has to make it clear that it will not pay back new debt. If we expect that debt or money will be retired with future taxes, then there is no great incentive to go out and spend to get rid of either. Only if it’s clear the debt or money will soon be inflated away does it make sense for people to try to get rid of money or debt now, and go out and buy. Link[my bold]

What inflation requires is public revulsion to government liabilities, and what produces public revulsion is the creation of government liabilities at a rate that destabilizes the expectation that those liabilities remain sound.

Ironically, the revulsion to government liabilities that would be required to produce inflation has been actively prevented by regulations that are intended to allow central banks to impose negative interest rates, in the hope of producing inflation. Link

I have a revulsion to the government creating/sponsoring more beneficiaries into poverty & chaos. Shouldn't be allowed.

I don't buy that at all. Most people in poverty were born into it, and it's over simplistic to expect most people to be able to snap out of that.
Remove the benefits and there will chaos.
There's no easy answers.
I don't think NZ could have approached poverty much differently than it has over the last 30 years. Whether Labour or National, governments have done an OK job in an incredibly complex area.

"Most people in poverty were born into itI" Perhaps, and so I suspect that JLM is suggesting that perpetuating generational poverty through the provision of benefits to single mothers ( and their hanger-on 'husbands') who have no other intention than taking the DPB and considering that to be a job is what they mean?
If you want to have children and be 'single', fine. But why should the rest of us have to pay for our children's upbringing and theirs?
Perhaps an option of termination and/or ongoing contraception might the choice for those seeking to use the system to their advantage, and might be an alternative to bringing more children into the benefit-funded cycle of being born into poverty?

Paying parents to have kids got us here in the first place. Generate more Labpur voters...

Also generated John Key and Paula Bennett. So you guys may be on to something...

Ok. But tell me what happens to them and society if the benefits are removed.
I am not convinced people will stop having children if benefits are removed.

Maybe. But until the 80's the DPB didn't exist and we still got along alright. Yes, children were born into all sorts of circumstances, and society looked after them in different ways. Often that was whanau or family that took care of mother,' father' and child. At worst, children were fostered out at birth, if they weren't 'wanted' or couldn't be looked after. Harsh, yes. But there was a personal choice at all stages, and if it was decided to 'give up the baby' that's what happened.

There is some validity in that.

I thought Nationals investment approach to welfare seemed like a good idea that was worth continuing. The idea of spending more up front to avoid having to pay long term made sense. Figure out what the person needs and help them help themselves. Much better than just giving a bigger welfare payment indefinitely. The fact is one size does not fit all. Recognising this is the key. It is a bit like charter schools. Not for everyone but great for some. Kelvin Davis is on record saying they were working.

@Long John Martin .........and we are about to condone meth dealing by single mothers because they are 'poor " and need the money .

Why people on meth are even receiving welfare, eludes me

Why would people with money (financial capital) invest in a country with a Labour government? The essential Marxist idea behind Labour seems to be that the interests of labour and financial capital are fundamentally opposed. They thus see themselves as the Anti-Capital party.

If capital and labour work against each other then society does becomes progressively less civilised. If they work together, then great things are possible.

A story like this needs a sound-track. Here's one of the best finger-pickers in the world: Larry Campbell - 'It ain't gonna be a good night', at Carter Vintage Guitars. Suits the zeitgeist, methinks....
Edit - added words and LC bio:
"The gypsy trembled when she gazed in her crystal ball
She said nothin's clear but I don't like what I see at all"

Is Phil Twyford the most incompetent minister of the past 30 years? This reading on light rail might convince you, after the Kiwibuild debacle. Hopeless. And once again, it's clear to see that he doesn't listen to advice.


Yes Phil is totally incompetent but there are a lot of coalition Government MPs very close to him

Lees Galloway runs him quite close

Claire Curran .. wasn't she a peach ... couldn't string two syllables into one coherent word ...
... last I heard she was running for presidency of the Dunedin chapter of Toastmasters International

Julie Ann Genter a solid 3rd

Jacinda is up there. Wrap everyone in cotton wool dreamland.

Kiwi's conned the term Coalition of Losers (COL) and it shows that they are onto it , we have an administration of clowns ......... who have taken over the circus

We know that the CRL has problems, what chance the airport light rail ... if its ever started

His inter regional fast train beats the lot!

" Twyford the Tank Engine " . . slowly slowly , kiddies ... a new trainset ... Wooo hooo ... 3 gears , all of them reverse ... go go go the new Labour reset Kiwi Regional Rail Build . .

"As I suggested in a recent column, the RBNZ may yet provide some stimulus of its own by announcing relaxation of the limits on high loan to value ratio (LVR) lending when it releases its next Financial Stability Report on November 27."

This nonsense just won't die !

What I find incredible is the number of commentators here, most if not all consider themselves knowledgeable to some degree in this field, who wilfully ignore the fact that we are very small country in a very big pond, very much subject to a number of external factors that our Government either cannot control, or does little to nothing to manage. It seems that most believe that if the world is melting down, somehow we are in our own little invulnerable bubble and won't be adversely impacted.

Just a small view of the issues the Government faces; their refusal to effectively regulate the residential housing market means helicopter money will more than likely just go into property speculation rather than something that generates real wealth and employment, no one seems to be interested in working to recapture manufacturing industries or stop losing those we already have, despite some evidence to prove that too many people is having a negative impact on our environment there is still a very high reliance on tourism and the service industries, and farmers and Government are still largely in denial of the impact agriculture is having on the environment.

Our current Government has to walk a tight rope. the changes will seem to be glacially slow (especially not speeding up due to global warming), but the alternatives are not pleasant no matter how they are viewed. I too struggle with where it appears they are reluctant to do anything, but there are some areas where their action is long overdue.

Great, now we need a team that can actually get something done.

@murray ............ you are simply wrong in your assertion that Government could somehow 'regulate' the residential housing market .

Its the most free market we have in NZ , a well run title deed system , willing buyers , willing sellers ,access to ALL market info including comparative prices , no barriers to entry (other than a deposit by way of a government LTVR ) , free and open access to an open buying forum (public auctions ) no land or transfer taxes.

Here's a challenge ...........Name one other market subject to such freedoms ?

Its a perfectly functioning market , the problem lies with Local Authorities rorting the public , the RMA , excess immigration and DC Levies , OTT health and safety costs to name a few

This hair shirt attitude to public investment and utter commitment to endless bloody consultation (what, pray is an election??). Two legs good, 4 legs better.... ie anything government or State does is supposed to be automatically inferior to the private sector doing it. Had that mantra for 35 years and here we are with crap railways, no auckland light rail service North of bridge, endless verbiage re Penlink and no action. Banks lending to business is parlous compared to RE because less risk to them. NZ GDP forecast in 2017 was 4% pa for 2 years followed by 3% after. Now its 2% and falling. Mortgage lending is static year on year. idiotic banks are offering cash backs as incentives, just like UK in 2006-07. How about people having enough money to spend without getting into more debt???

Bank profits don't help, and the same can be said for Foreign Multinationals. For every $1 Billion the banks repatriate there's 1 less Transmission Gully, Waterview Tunnel etc. Last year's combined Aussie Bank profits would fund 80% of the budgeted cost of the Auckland Light Rail.

We just need to get rid of this hopeless Government as soon as possible .

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