For anyone interested in a bit of background to this blog, and on me, Richard Harman, proprietor of the new New Zealand political news and analysis site, Politik ran a profile of me this morning.
It is a pretty fair reflection of our interview, and reflects my interests and aspirations – in particular, the issues around New Zealand’s long-term economic underperformance matter a great deal more to me than critiques of aspects of the Reserve Bank. When I left the Reserve Bank, I intended that Bank-related material would represent a distinct minority of my posts. That is still my aim, but it may take some time to get there (and as one journalist who came to visit said to me “I wouldn’t be here if you were writing mainly about long-term economic performance issues”).
Sadly, the description of the Governor’s attitude to some criticisms I made of a draft document around the first set of LVR controls is accurate. After that episode – where even the extreme disapproval was only conveyed indirectly – our next conversation was two years later when we accidentally found ourselves alone in the same lift in the midst of the restructuring that led to my job being abolished. I was clearing my desk and carrying a box of books down to my car. To his credit, Graeme did actually manage to make conversation – about Piketty’s book, a copy of which was on top of my pile.
I should make one clarification/correction. I’m reported as saying, about LVR restrictions, “Furthermore the Bank had done no research on what the likely impact of the controls might be.”. I don’t think that was what I said, but if I did say it, it was not what I intended. My criticism of the Bank’s analysis and argumentation around LVRs has been around
- the failure to produce research looking carefully at the lessons of countries that did, and did not, experience financial crises in the last decade,
- the failure to meaningfully engage with the Bank’s own stress test results, which suggest the New Zealand system is very resilient to even quite severe adverse shocks, and
- the failure to engage with the statutory requirement to promote the efficiency of the financial system.
And in the final sentences, I’m not sure how my friend and former boss Don Brash ends up classified by Harman as a “non-practitioner”.
croaking cassandra 
New Zealand’s long-term economic underperformance
– We don’t save enough of the right type of saving.
– All our money goes into bidding up land prices – this is about as an unproductive use of money as it can possibly get & also we borrow that money mainly from overseas so the profits flow out of NZ. This is savings but its absolutely useless & does not improve the productivity of NZ Inc.
– So NZ has saved little money and has little in productive assets.
– We also sell off all our major assets so that there is a constant dividend stream flow out of NZ. The dividend flow is not controlled by NZ so we have no influence or choice where that money is then used. Given the overseas control of the dividend flow there is a likely bias towards using the money productively elsewhere. Doesn’t help NZ is small & isolated and probably lacks investment opportunities of scale.
– We also seem to have too many incompetent NZ managers. There are many large NZ businesses which have gone under (Chasecorp, Air NZ with Ansett etc etc) We have destroyed value instead of increasing it.
– NZ does need a bigger population for critical mass but not at the insane immigration rate policy the government is running & helping to blow the unproductive asset bubble bigger.
– The RBNZ should be applauded for introducing the LVR restrictions even if the analysis is incomplete. Its one of the few tools in the tool box along with increasing capital requirements of the banks to keep the bubble manageable.
– Roll on a comprehensive capital tax or something close to it so that we remove some of the distortions in the economy.
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