National Leader and potential Prime Minister-within-a-year, Christopher Luxon, has rejected suggestions from the Reserve Bank that its own review of its performance by independent overseas experts was sufficient instead of a fully independent review proposed by National.
Luxon repeated his view that there would need to be a fully independent review before current Reserve Bank Governor Adrian Orr could be reappointed for a second five-year term from the end of March next year, which would include all of Luxon's first term in Government if elected. Luxon has criticised the bank for unleashing a 'wave of cash' that helped increase inflation beyond the Reserve Bank's target band. He has also referred to criticism by former Reserve Bank officials that the bank was 'incompetent' and reckless under Orr in calling for a review of the Reserve Bank's actions in the wake of Covid.
Orr said last week the Reserve Bank was a learning institution that planned to put out a report from independent overseas experts before the end of the year. It is part of a wider five-yearly review of the bank's monetary policy settings and operations.
Asked in Parliament if National would accept the review of overseas experts overseen by the Reserve Bank, Luxon said: "Our preference is to see something independent. As we said - an independent inquiry because it's a bit like judging your own homework and marking your own homework. That's why I think there'd be some real value in dispassionately going through that period of time post COVID and seeing whether we've got all those settings right."
Asked if he wanted a fully independent inquiry done before Orr was reappointed, Luxon said: "That was our view that we thought actually having our inquiry, as we proposed, was actually a good idea. We can have those findings before his term comes up for renewal."
The clock is ticking for the Reserve Bank board, Finance Minister Grant Robertson and a potential National Government-in-waiting over whether Orr deserves or should get a second five-year term before it expires in late March next year. The heat over what would normally be a routine and apolitical decision has intensified in recent weeks because of the trenchant criticism of the Reserve Bank's performance over the last three years under Orr, and the call for full independent inquiry from National. Orr refused to answer questions last week about whether he wanted a second term.
That creates the potential for a dangerous standoff between the operator of monetary policy and the operator of fiscal policy. Orr's predecessor as Reserve Bank Governor, Graeme Wheeler, a previous Reserve Bank chairman and grandee, Arthur Grimes, ex-Deputy Governor and Acting Governor Grant Spencer, and previous Reserve Bank Chief Economist, John McDermott, have all publicly criticised the bank's performance under Orr.
They have argued it should not have kept printing $55b through late 2020 and 2021 to push down longer-term interest rates, and that it was at least partly responsible for inflation surging to 7.3% this year, well outside the Reserve Bank's 1% to 3% target band.
Finance Minister Grant Robertson rejected Luxon's call at the time, describing Luxon as "Captain Hindsight" and saying he had confidence in Orr. Robertson also said he was working with the Reserve Bank board on the issue.
The issue emerged last year when Simon Bridges, then National's Finance spokesman, said he would oppose Orr's reappointment in the period shortly before the 'caretaker period' in the lead-up to an election.
Orr made a point at last week's Monetary Policy Statement news conference of specifying that a review of the bank's performance would be released publicly by the end of the year as part of the first once-every-five-years review of the Reserve Bank's new Monetary Policy Remit, which included a requirement to support full employment as well as targeting low inflation under changes to the Reserve Bank Act in 2018.
Luxon has called for the removal of the full-employment requirement.
Orr talked in the news conference about a two-step process in the five-yearly review, with an initial report including independent comment from overseas experts due before the end of the year, before a final review of the Remit early next year. The overseas-expert-included review was painted as proxy for the independent review.
The Reserve Bank of Australia is currently facing its own independent review, which was ordered by the new Labor Government under Labor Treasurer Jim Chalmers. The overseas review would be released before the end of the year. That would give the board and Robertson time to assess a second-term decision. RBNZ Assistant Governor Karen Silk said former Reserve Bank of Australia board member Warwick McKibbin and former Bank of Canada Deputy Governor Larry Schembri were the overseas experts for the review. McKibbin's partner and fellow macroeconomic academic, Renee Fry-McKibbin, is one of the members of the RBA review.
32 Comments
Despite me disliking National and most of the shadow cabinet a lot, I will vote for them or ACT at the next election. Someone needs to be held to account for locking citizens out and the implementation of the putrid lottery system Labour put in place. A proper independent review of the rbnz would be a bonus.
My faith in a party of property speculators doing anything much different or really holding Orr or the RBNZ to any different standard is, well, quite a bit smaller than the proverbial mustard seed. Doesn't seem realistic, to me.
Maybe just a review, a report, or a working group to chit-chat about it and then conclude "nothing much".
Never thought I would agree with you TK but today I do. However, an enquiry needs to be wider than the actions of the RBNZ. It should focus on the whole management of COVID-19 including economical impact, legislation enacted, procurement of vaccines/RAT tests etc. As some examples the Law Society expressed concern about the amount of legislation being forced through under urgency (1), 6-weeks were lost due to inaction by David Clarke (?) with confirming vaccine orders (2), lieing about procuring RAT tests, (3) High court ruling that dismissal of armed forces personnel and Police was unjustified if they weren't vaccinated. Please don't get me started on the lottery system for returning NZers.....
The whole system needs a review. Not just rbnzs part.
Ie : Rampent saturation of msm buy the RE industry is as much to blame for the housing crises as much as easy credit or jib board drama...
Luxon just jumping on the band wagon. Whilst simultaneously wanting to kick immigration into overdrive and effectively repeat the process.
As much as I dislike the Labour fluff and woke BS, national will hardly make a material difference to anything that actually matters.
Climate change. Growth limits. Productivity vs importing cheaper labour. The unsustainable nature of our diary farming.
What don't you like about NZ dairy farming? I've researched Australian, American, and European dairy farming systems and have concluded that we have a far more sustainable approach here, mainly due to the nature of our pasture-based system. Dairy pasture soil sequesters carbon rapidly, the key factor being rotational grazing and low soil disturbance due to pasture being mostly permanent rather than cropped.
Honestly?
I don't get our relationship with cows.
From a food chain perspective it doesn't make sense to me to have so much dairy farming, we need the energy we get from plants and cows to me are just an unnecessary medium. But that's just me talking and I'm 90% vegetarian, don't drink cows milk etc. The only milk based products I regularly consume is cheese.
Note I do love bbq & burgers... But my heart doesn't... Hence I made that change few years ago (highly recommended anyone giving plant based diets a go. The difference it made to me was huge)
Aside from that?
Its clearly an industry that at as it stands now (industrial/intensive) is a major greenhouse gas emittor. My understanding is that plant based protein products generally speaking have lower carbon footprints. Also that the climate commission has recommended reduced heard sizes etc.
So given that eating less animal products is better for you (there are no fat vegetarians...) And given its current climate change impact (in its current form/size). I don't see the justification for trying to invest in new tech (or invent things like carbon credits etc). With the expectation in maintaining the status quo.
Its a big business and big exporter. Get that. But I think its prevalence is more due to the profits involved in selling hamburgers to kiwis and milk powder to the Chinese, rather than it being either good for you, or genuinely sustainable from a climate perspective.
So for me, the question I ask is why do we not swap some of that agriculture capacity for plant based alternatives. Or other uses for the land. I'm assuming the answer is cost, land suitability? Bottom line profits are there to be made in dairy etc. All that infrastructure exists. But is that any different from say our need to get away from ice transportation?
Appreciate that many here will make a living in this industry. And I'm talking very idealisticly. But I just don't see us escaping from completly melting the polar ice caps without some growing pains. That might come in the form of accepting we have over shot our growth limits, accepting that plant based diets are better for the environment, or accepting that current industry standards are giant problems that may have no easy answers aside from cost and reduction in size.
Hell will freeze before the right wing fundamentalist, trumpian apologists called National get anywhere near the treasury benches again. If they do, there will be a revolution.
Luxon is just a lacky of the right wing neoliberal fundamentalists out of the USA. Was just over there recently to get his orders...
The RBNZ's performance under Orr has been nothing short of dismal. There should not even be a discussion on whether Orr should get a second term - he should simply go, right now if possible. Enough damage has been done already, caused or magnified by his stupid, shortsighted ultra-loose monetary policy mistakes.
There should be a truly independant report. So the facts are written. Then he gets the chop.
It needs to be a very clear set of reasons for a very public consequence - for people who have been playing fast and loose with our economy. With potentially catestrophic consequences for the poor, middle class and the next generation of kiwi's.
Leaders need consequences for reckless ill concieved actions. To ensure the next leaders do not also behave recklessly. Else it will become endemic as now.
Truely independent review - then facts written - then he gets the chop. Made up your mind then. Not open minded at all.
What about innocent until proven guilty.
just shown the colour of your beliefs.
Must be pale and male - and certainly nothing to do with the indigenious population. Must follow the orthodoxy. Must ensure our masters get more control and continue the impoverishment of the common person in NZ.
Prejudged outcome - obvious. No better than a T.... review
Robertson also said he was working with the Reserve Bank board on the issue.
The Board recommends to the Finance Minister who should be appointed as Governor (the RB Governor recuses himself for these decisions under s72 or 3 of the RB Act).
Is 'working with the Board' code for 'don't bother recommending Orr for a second term'? It is politically less dangerous to get Orr not to put himself forward than it is to be in a position to reject a recommendation from the Board.
All these Gnats that are whingeing and moaning about Orr's performance were perfectly happy with him up until about 6 months ago.
They LOVED the boom. Saw nothing wrong with 40% house price increases. Nobody gave a toss about unsustainable private debt levels. The looser the monetary policy, the better. None of them would hear a bad word about Orr.
It's only now that house prices are falling that 7-houses Luxon & Co are complaining.
Same story here in the comments section. Many people who thought Orr was a good bloke while house prices were skyrocketing are now lining up to put the knife in.
When every major central bank in the world (other than Japan) made a royal mess of things - perhaps it is time for an inquiry into our foolhardy reliance on monetarism?
We spend millions and millions on paying people to wiggle the interest rate lever up and down as if that one lever can elegantly balance currency exchange rates, investment, savings, employment, aggregate demand, house prices, etc etc. It's really, really stupid.
A review of the recent events may have some value, but I think that it would be far more meaningful to to have a blank sheet of paper review of how the reserve bank system and the CPI/OCR management model has served us over the past 40 odd years that we have used it. A lot less blame oriented and a lot more facts based and hard headed. We have accepted this regimen with unquestioning near religious faith and nothing is that perfect or beyond critique. In my view it has some very significant faults so I think that we should start from the point of asking what are we trying to achieve, how does our system serve us and are there other options that may be better?
Problem I have with resetting the system now.. There are a lot of people, normally older than me, that have hugely benefitted from the exploitation of said system.
So now that I'm in a position to take advantage of the status quo.. We now upend things to make it long term relevant? Or sustainable?
I'm of a belief that when we mix human greed, growth limits, the Internet, central banks and climate change together..... Social revolution is almost inevitable.
Sure there were a relitively few number of people storming capital hill. But I'd wager most of Those reading this comment have an underlying skeptical view of our current setup.. And does anyone here actually think we are doing enough to either address the finacial and ecological imbalances that currently exist?
All it needs is a couple of lean years, and a galvanising force.
You can see how easy it would be when you look at recent popular movements. Brexit, Trump. Even the meteoric rise of Ardern.
“Finance Minister Grant Robertson rejected Luxon's call at the time, describing Luxon as "Captain Hindsight" and saying he had confidence in Orr.”
There appears very little support for Orr from those with a degree in finance or economics. Perhaps there should be a survey to see how much support he has from the educated community.
RBNZ has printed more money per head of population than almost every country in the world. Surprise surprise NZ has a huge inflation problem.
Why is the FLP programme still going. Let’s keep printing cheap money & subsidising the banks. Better still let’s keep excessive government spending going on centralisation & other ego projects such as buying Kiwibank & see if that solves NZ’s inflation problem.
Luxon actually making a clear stand on something, gosh.
The trick with this review thingy is who chooses the reviewers. I am deeply suspicious of the RBNZ choosing it's own reviewers, particularly overseas ones, as the RBNZ are particularly prone to believing the global groupthink. Whatever forces are shaping this global groupthink at the time, you can be certain they DO NOT have the welfare of New Zealanders as a priority.
Adam Curtis's Hypernormalisation comes to mind:
The main problem with the conception behind the current thought process, is the belief that centralised price control of the price of money is a good idea. Despite price control of individual prices being a bad idea, as it distorts the signalling that pricing provides to consumers and producers.
Central planners always think central planning is good, any past failures were because it just wasn't done right.
Luxon is trying to be a T****p and ensuring his lackeys are appointed to the institutions of state. Quite transparent - and an absolute threat to democracy. But then to be expected from a right wing religious fundamentalist.
Perhaps its because the current governor is not a pale white male.....
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