David Hargreaves says Governor Graeme Wheeler's 'non-speech' this week is not a particularly distinguished way for our central bank to start a New Year that promises, globally, to be very turbulent

By David Hargreaves

Back in September 2015 I complained strongly about the Reserve Bank's decision to reduce the number of times in a year it reviews official interest rates.

Previously, before the RBNZ made changes, there was a full Monetary Policy Statement in December followed by a rate review issued in just a one-page press release in late January.

Now we get the full MPS announcement in November, followed by another full MPS announcement in February - but there's a three month gap between these announcements. As well as this long gap we also now have fewer (with seven) reviews during the year than most major economies.

I thought when this change was announced in 2015 that the three month summer gap was too long and risked our central bank being caught on the back foot by developments in the rest of the world - bearing in mind that most significant economies in the globe don't disappear for their summer holidays during the time we do.

Now I've been given another reason to not like the new format.

Out with tradition

Yes, seems now that the RBNZ Governor's tradition, established in 1995, of giving a public, on-the-record speech to the Canterbury Employers Chamber of Commerce, setting the scene for the year ahead has now been, effectively, canned.

Rather meaninglessly, so far as I'm concerned, Governor Graeme Wheeler will now give an off-the-record speech to the chamber of commerce that contains no new information on monetary policy. Why bother? Some comments behind closed doors to a select few who probably already know exactly what the Governor might say and won't be influenced one way or another by these 'new' comments.

Also, why when the RBNZ has known since mid-2015 that it would have the clash between the Canterbury speech and an MPS two weeks later did it not either seek to move the speech - thus retaining it on-the-record - or at least let the market know rather earlier that the traditional year-opener was being canned, or more to the point, neutered, this year. Clearly at least some bank economists did not know last week that the speech would be off the record - because they were making comments in anticipation of the speech.

I can see the RBNZ logic that there was peril in the Governor giving a forward-looking speech only two weeks ahead of the release of the full MPS with its detailed economic and financial forecasts. The RBNZ also makes the point that its published speeches "are more driven by dynamic strategic communication needs than by the coincidence of a host’s event timing". Specifically the RBNZ can point to the fact that the new February timing for a Monetary Policy Statement will enable it to include important data such as this week's inflation figures in the updated economic forecasts.

Anything could happen

But I don't think this need have stopped the Governor giving some views on what is an extremely colourful global environment in which virtually anything could happen.

For me this all serves to highlight the lack of sense in the decision to move to the new OCR timetable because it's just so inflexible now.

I think 'dynamic strategic communication' should include trying to reach the public and get the public onside with what you are doing - and it's not enough to just talk through the markets all the time.

I think it just works to have a 'holding' OCR decision in January (but leaving the option for some action if its really needed), followed by the Governor setting the scene for the year in a visible and human fashion - not like the turgid, oh-so-careful, but impenetrable-to-the public release of an MPS document and the turgid, forced, media conference that follows.

But there's other issues here that add to the intrigue too.

Time up

Wheeler's five-year term as Governor expires in September and there's been no indication at all whether he's looking for another term - or whether such would be granted by incoming Finance Minister Steven Joyce.

Such decisions will have to be made very much sooner rather than later.

It's worth noting that in 2012 the then Governor Alan Bollard announced on January 30 that he would not be looking for another term. This gave time for an official search for a replacement, with Wheeler announced as the new Governor by then Finance Minister Bill English in June 2012.

So, given this historic precedent, with a formal announcement at the end of January, the assumption is that these decisions on the Governor's term are all due to be made pretty soon.

Approached for comment this week on the timing of any announcement, the RBNZ said it couldn't give any indication.

Take what you will from that. I take that some announcement is probably imminent.

Confusion?

The other point I throw in here is that the RBNZ as part justification for holding this speech off the record, says it doesn't want to risk confusing the markets so close to the MPS announcement.

If we want to talk about confusion, let's go back to last year.

On January 28, 2016, the RBNZ released it's one-page press release leaving the OCR at the then level of 2.5%. Undoubtedly the RBNZ would have viewed the market reaction as reasonably positive - the Kiwi dollar continued its recent downward path, and interest rate swaps fell.

On February 3 Wheeler gave the Canterbury speech, on-the-record and including such language as how the RBNZ would not 'mechanistically' cut rates to increase the rate of inflation. Interest rate swaps rose slightly. The kiwi dollar rose rather more strongly - something the RBNZ expressly did NOT want.

The RBNZ has subsequently been fairly defiant about that speech, in effect claiming it was misinterpreted. I've read the whole speech a few times and it still reads to me like the words of someone who was hell-bent at that stage on not reducing interest rates any more.

If the market was a bit confused, it became rather more confused on March 10, 2016 when the RBNZ cut rates to 2.25%. Two more subsequent rate cuts in 2016 took the OCR to its current 1.75%

If I were Graeme Wheeler, I don't think I would have very fond memories of the Canterbury Employers Chamber of Commerce and of speaking there. So perhaps off-the-record will be just fine for him. But I think the country deserves more.

The disappearing Governor

In his first full calendar year as Governor, Wheeler gave (according to the published records on the RBNZ's website) five public speeches. Then there were seven in 2014. Then just three in 2015. And last year? TWO.

(Though there was another speech last year that was written by Wheeler but delivered by Assistant Governor John McDermott).

There was a 10-month gap between the first and second speeches that Wheeler actually delivered.

It's true that more on-the-record speeches have been given by other senior RBNZ officials, particularly the deputy and assistant governors. But however much Wheeler might internally want to operate as part of a committee, externally he is the guy that counts. He's the guy on the $600,000-plus salary with whom the buck stops. And the public want to hear from him.

Sure, there's an argument that says a communications strategy can't be measured simply by how many press releases, speeches etc are put out. Absolutely. But the flipside is that if someone in public office disappears publicly for long periods then misunderstandings about them, what they do, and how effective they are, will only increase.

The RBNZ is an organisation that has a big influence on the interest rates we pay and what we can or can't borrow for a house - more so than ever since the advent of LVRs. I think that makes it publicly accountable.