By Gareth Vaughan
The Reserve Bank's response to the Covid-19 pandemic followed a misdiagnosis of the problem, and we ought to use an inquiry to develop a blueprint for managing future challenges, says The Opportunities Party (TOP) Leader Raf Manji.
Speaking in interest.co.nz's Of Interest Podcast, Manji says any inquiry into the Reserve Bank's response to the Covid-19 pandemic should be as apolitical as possible.
"Let's look at what we did, could we have done things differently, what were the impacts of what we did, and could we have changed that response at an earlier stage? And I think clearly the answer to that is yes," Manji says.
"One of the first focus points was the misdiagnosis of what was happening. And I think for me when I go back, and it's important that we all reflect on what we said at the time, I was very, very clear that this was a liquidity crisis. It wasn't particularly a credit crisis, it was not a business cycle recession or depression, yet that's how it was being treated."
In terms of quantitative easing, or the Reserve Bank buying up tens of billions of dollars worth of government and local government bonds in the secondary market from banks, Manji says he'd have preferred Treasury and the Reserve Bank to deal directly with each other rather than "providing huge amounts of profit for the banks."
"New Zealand's problem, which is always our problem, is the huge focus on the property market and the impact that has. And there's no doubt that probably, whichever data you look at, probably a third of our inflationary impulse was from the housing market and the follow on effects of that, the renovations, the squeeze in capacity, and just the extraordinary rise in property prices," says Manji.
"I think if the Reserve Bank had looked a little bit more carefully at the outcomes of its policy towards the end of 2020 they might have gone 'okay everyone, let's get in a room, what has happened here, do we need to change our policy'?"
"We're in a position that could've been avoided to some extent," Manji says.
In the podcast Manji also talks in depth about interest rates, inflation, government debt, overt monetary financing, the Government's fiscal policy response to Covid-19 and more.