Day: February 15, 2016

The Reserve Bank’s OIA charging policy release

Michael Reddell OIA, Reserve Bank

Thanks to Eric Crampton for alerting me to the Reserve Bank’s OIA release (to Alex Harris) around its new charging policy.

The documents are interesting in that they provide us with some data.  The Reserve Bank has complained about a large increase in the number of OIAs they have been receiving, and used that as one justification for the new charging policy.

 18 requests in calendar 2010

21 requests in calendar 2011 – up 17% from previous year

30 requests in calendar 2012 – up 42% from previous year

45 requests in calendar 2013 – up 50% from previous year

47 requests in calendar 2014 – up 4% from previous year

70 requests in calendar 2015 – up 49% from previous year

As they acknowledge, the Reserve Bank has been rather more active in a number of policy areas in the last few years –  LVR restrictions are the most obvious example –  which might have been expected to generate more requests, and more (attempted) scrutiny of the Bank.

But what is a reasonable baseline?

In their paper, the Bank staff note that the Treasury informed the Bank that they had a team for four full-time staff to handle OIA requests (and had charged only one person –  an academic with a large research grant – some years ago).  We don’t know how many OIA requests Treasury deals with each year (for requests to The Treasury itself, and those it handles for the Minister of Finance), but on the Treasury website there  are more than 100 OIA releases in the last 12 months –  and that list is described as “selected responses” and also excludes pro-actively released material (such as the post-Budget large pro-active release).

The Treasury is a larger organization than the Reserve Bank (around 420 staff to the Bank’s 260 or so), and covers a wider range of functions.  On the other hand, the Reserve Bank has a large amount of delegated power in a variety of very significant areas (monetary policy and banking regulation), and with a very large balance sheet.  It isn’t obvious that 70 OIA requests a year is an unreasonable number for an organization of the power, size, and importance of the Reserve Bank.  Perhaps –  as various people have suggested –  it is just that the Reserve Bank was getting off surprisingly easily in the previous few years?

In the note to the Bank’s Senior Management Group I am listed as one of the culprits –   having, at that time, apparently lodged 16 OIA requests in 2015 (the final total would have been 2 or 3 higher).  Curiously, the Bank proposes in the documents a benchmark for charging in which charges would apply to people making more than a rolling average of two requests per month.  Not even I managed that last year –  and I haven’t lodged a request with the Bank this year to date.   As the No Right Turn blog puts it:

The bank’s cutoff for when it will refuse a request for “substantial collation and research” is a mere three hours, while their definition of a “high volume requester” is someone who makes two requests a month for two months. Combined, these basically rule out any use of the OIA for serious research or investigation of the bank’s policies, whether by academics, investigative journalists, or the public. And while MPs won’t be charged, their requests will still be refused if they take more than that three hour limit. The net result: less scrutiny, and a specific incentive against regular scrutiny. Which means less accountability to the public.

I had a quick look through my email inbox to refresh my memory of last year’s requests:

  • four related to issues around the Bank’s superannuation fund. I am an elected trustee of that Fund, and we have been grappling with some difficult and serious issues raised by a pensioner about events in the late 1980s and early 1990s.  The Governor’s alternate (Geoff Bascand) had been actively seeking to close the issues down, without further investigation (even though they have already led to the discovery, disclosure, and apology for the fact that past trustees –  chaired by Don Brash, and including the current head of the New Zealand Transparency International –  had broken the law).  The only way to get some of the information needed was to request it from the Bank under the Official Information Act.    In no case was any substantial research or collation faced by the Bank (in one case I was simply told to photocopy the pages I wanted).
  • When I left the Bank I sought approval to use old discussion notes and memoranda that I had written.  This was an entirely friendly approach, designed to minimize future requests by, in effect, seeking general approval to quote old papers (I even excluded from the request one paper I knew the Governor was sensitive about).  Approval could have been granted, at least for older papers, with no Bank resources at all.
  • I sought the release of background papers to one of the 2005 MPSs.  These were 10 year old documents, nicely collated and stored. The point of the request was to establish the principle that such papers should be public, at least with a lag.  The request should have involved no material costs to the Bank, and when the papers were finally released –  well beyond 20 working days –  there were no deletions at all.
  • In two cases, I sought background papers after major changes of view by senior bank management –  changes where no reasoning was provided at the time.  One related to capital gains taxes, and the current one relates to immigration.  Since they were current issues, (of material public interest) there should have been limited resources required to respond promptly.
  • I requested background papers relating to 2012 Policy Targets Agreement. As this is the key document governing monetary policy, and no background papers had been released at the time the PTA was signed, it seemed desirable to better understand what the Minister and Governor had had in mind (especially in light of the current monetary policy stance debates).
  • I requested papers relating to the extensive work programme the Reserve Bank had been doing on reforming  the governance of the Reserve Bank.  The Bank has refused to release anything of substance, a quite extraordinary stance for a work programme that has now (apparently) ended (and quite in contrast to the Treasury’s approach to a request on that work).
  • I sought papers provided to the Bank’s Board relating to the September MPS.  The Bank will have spent next to no resources on this request, since was refused completely (as I expected, but I wanted to establish the point).
  • I sought minutes of the Bank’s Governing Committee for a defined period last year.  The Governor has been keen to stress the role the Governing Committee plays in decisionmaking, and as is well known it is common for minutes of key policy committees in other central banks to be released.  Totally refusing this request will also have taken almost no resources, since there was no sign in the response that they had considered the individual meeting minutes.
  • I requested one specific paper I had written about fiscal and monetary events in 1991 –  the first big test of the inflation targeting framework.  This request was, of course, necessary only because the Bank had (see above) refused my general request to be able to cite my old papers.
  • I requested copies of the submissions on the new investor finance restrictions.  After great difficulty, and only after another media request, were some of these documents released (in total). It remains common practice elsewhere in government to publish submissions pro-actively.
  • I requested copies of submissions on the regulatory stocktake.  Comments as for the previous item: costs and resource pressure arise entirely from the Bank’s choice to be non-transparent.
  • And I made two requests relating to the (TPP) Joint Macroeconomic Declaration, to which the Reserve Bank is a party.  The second request followed when the first request was denied in full.  The second request is still pending.

Reviewing that list with the benefit of hindsight they seem like exactly the sorts of requests that a central bank and financial regulator might expect in the course of a year like last year.  Most would have been avoided if the Bank adopted the sort of pro-active transparency, as regards process, that is now best practice, or (in some cases) had simply explained itself.  Even when material was released, it was almost always done on the last lawful day, or after an extension or two.

(Of course I would say this), but none of the requests appear vexatious or deliberately time-wasting.  I have been encouraged to make other requests of the Bank –  to seek information on the process they have used on each of the requests they have stalled, obstructed or refused, but have chosen not to.  I’m less interested in the details of any particular request than in the general pattern of obstruction and (despite their claims) non-transparency.

The Official Information Act is about improving access to official information –  an idea that the Bank appears to be rather uncomfortable with.  As I’ve noted before, it may be that their charging policy is lawful, but if so there is something amiss with the law itself. Whether or not it is lawful, it is not good practice, and not consistent with the sort of image –  an open and transparent institution –  that the Bank regularly tells us it wants for itself.

A transparent central bank? Not our one.

Michael Reddell OIA, Reserve Bank, Uncategorized

Readers may recall that on the day of the December Monetary Policy Statement I lodged a request for analytical papers the Bank had considered in recent months on the economic impact of immigration.  The background was (a) the Governor’s press conference endorsement of New Zealand immigration as “a good thing”, and (b) the explicit statement in the MPS that the Reserve Bank had changed its view of how immigration affects the short-term balance between supply and demand pressures.  As they stated in the key policy judgements chapter:

Record net immigration is adding materially to demand and to labour supply.  Given continued strong flows, we have revised up our projection for net immigration (see chapter 5).  Based on the cycle to date, we assume the future population boost and associated increases in the labour force will translate more quickly into supply potential than we have assumed in the past.

That has important implications for monetary policy.

But there was nothing in the rest of the document, or in the answers at the press conference, to explain this quite marked change of stance.  As I have pointed out, the new stance is not just different from their past view, but different from quite recent Bank published research, in which demand effects exceed supply effects in the short-term, meaning that all else equal the OCR tends to rise when net immigration does.

As I noted a couple of weeks ago, when the Bank extended my quite limited request, it had seemed at the time like a fairly simple request: show us the analysis you are using to back what represents quite an important change of view.

A short time ago, I received the Bank’s final response.  The heart of the response is here (I’ve highlighted the section in bold)

The Reserve Bank holds 20 documents within the scope of your request, which are all related to either the Monetary Policy Committee or the Governing Committee’s discussions of Monetary Policy.

The Act explicitly recognises, in section 4(c), that there are times when releasing information is against the public interest and provides for such circumstances with different types of reasons to withhold information. The Reserve Bank is withholding these 20 documents under the following grounds of the Act:

  • s6(e)(iv) – to prevent damaging the economy of New Zealand by disclosing prematurely decisions to change or continue government economic or financial policies relating to the stability, control, and adjustment of prices of goods and services, rents, and other costs;
  • s9(2)(g)(i) – to maintain the effective conduct of public affairs through the free and frank expression of opinions by or between officers and employees of any department or organisation in the course of their duty;

The papers about immigration that you’re seeking were prepared in the context of monetary policy discussions, including setting the Official Cash Rate and publishing the Monetary Policy Statement. As you are aware from your time working at the Bank and from your previous requests for information related to both the Monetary Policy Committee or the Governing Committee, the Reserve Bank considers that information provided to and discussed recently by policy committees in relation to setting the Official Cash Rate must be kept confidential in order to ensure that free and frank discussion occurs and that free and frank advice is provided to the Governor. The Bank considers that the need to maintain confidentiality abates over time as the economic cycle moves along, but that current and recent advice must remain confidential in order for the Bank to effectively perform its monetary policy function. Public disclosure of current and recent advice occurs, in summary form, via publication of the Monetary Policy Statement and associated news statement. The process of deciding what to publish in the Monetary Policy Statement recognises and balances the tension between disclosure and confidentiality.

Frankly, if they had told me that they had no papers within scope I might not have been unduly surprised.  Sometimes forecast assumptions are tweaked to produce the bottom line the Governor wants (always have been, probably always will be).

But to suggest that no paper on any aspect of immigration that went to the Monetary Policy Committee  at any time over the five months or so leading up to the Monetary Policy Statement can see the light of day, on principle, seems completely inconsistent with the statutory purposes and principles of the Official Information  Act –  designed to make information more available.  And there is no sign that the Bank has considered the papers one by one: it looks a lot like a blanket refusal.

As for the statutory provisions they quote:

  • section 6(e)(iv) simply cannot be used here. It refers to premature disclosure of decisions.  My request was for background analysis or research.
  • and the invocation of the “free and frank” provisions is also, at best, a stretch.  I didn’t ask for minutes or records of discussion at meetings.  I don’t even ask for individual pieces of OCR advice (the one page notes advisers submit), but for pieces of analysis –  prepared, most probably, in one or other of the sections in the Economics Department.  The material clearly exists.  It is official information.  We should be able to see it –  especially, when it has “important implications for monetary policy”.

As I’ve noted repeatedly there is a far higher degree of transparency (and timely transparency) around background papers feeding into the government’s Budget deliberations.

I noted recently that “the Reserve Bank constantly tries to convince us of how transparent it is.  As Deputy Governor, Geoff Bascand, put it in his first on-the-record speech ”

The Reserve Bank is deeply committed to transparency – of policy objectives, policy proposals, economic reasoning, and of our understanding of the economy, and of course of our policy actions and intent. Clear communication and strong public understanding make our policy actions more effective.

We are working to enhance the openness and effectiveness of our communications

Mine wasn’t a request for anything obscure.  It didn’t have a “gotcha” agenda –  though legally it doesn’t matter if it did. (And, if anything, their change of view happens to support my current view on monetary policy).   It was just a request to see the background papers that appear to have led to a large change of view, on an important part of how current shocks affect the economy and inflation pressures –  a change not elaborated on at all in the document they did make available, the Monetary Policy Statement.    To enable us to better appreciate, in Bascand’s words, their “economic reasoning, and…our understanding of the economy”.

The Bank simply isn’t very transparent at all.

I will pass on this response to the Office of the Ombudsman.

The cause of getting some insight into the Bank’s view of immigration is not, apparently, totally hopeless.  At the end of today’s email they did include this

The Bank holds other information that is not within the scope of your request but that nevertheless may help shed light on the Bank’s views about immigration. This material is currently being worked on with a view to publication and the Bank will inform you when it is available.

I’ll look forward to seeing that material when it eventually appears.  But, as they note, it isn’t within the scope of my request, or within the sort of 20 working day OIA timeframe.  It continues the Bank’s longstanding approach of acting as if the principles of the Official Information Act really don’t apply to them, and that as far as possible only things that the Bank has written for external publication should see the light of day, not “official information” as defined by Parliament.

 

TPP: some more economists

Michael Reddell TPP

In a post a couple of weeks ago,  I highlighted the comments several New Zealand economists had made about the TPP agreement.  Reasonably enough –  since to evaluate the full detail involves a great deal of in-depth work –  none seemed overly confident in their views, but none seemed to see the agreement as any sort of landmark beneficial economic advance for New Zealand.

Since then, a couple of other economists have put views on record. Jim Rose, a consultant who has worked for various New Zealand and Australian government agencies (including the Australian Productivity Commission), starts by observing that the “correct” economists’ reaction to regional trade agreements, in principle, would be one of “lukewarm opposition”, reminding us that this is also the stance of Paul Krugman who – whatever his politics – built a stellar academic career thinking about trade issues.

Regional trade agreements risk making all parties to the deal worse off, not better off –  by increasing trade between country pairs that are party to the agreement, rather than those best able to produce goods and services most efficiently.  The Australian Productivity Commission has been quite forthright in highlighting this risk as regard Australia’s various regional trade agreements (including CER, but most notably including the US-Australia FTA).    A new, quite recent study, by Shiro Armstrong, a senior academic at the Australian National University, reviewed the US-Australia FTA.    He concluded

Australia’s historic trade liberalization efforts produced clear welfare gains, and the winners and losers from these reforms were determined by market forces and competition. Trade agreements that introduce distortions and discriminatory treatment mean that winners and losers are largely determined by preferences and privileges assigned through negotiated treaties.

The US agreement carries important lessons for Australia in its future trade and foreign policy strategy.  The conclusions of the Productivity Commission’s review apply to AUSFTA. Deals that are struck in haste for primarily political reasons carry risk of substantial economic damage. The question then is whether the economic costs of such policies are worth whatever the political gain, and indeed, how the balance of properly calculated political gains and costs might look.

Rose’s stance is informed by this sort of literature and experience, which barely seems to have factored in the New Zealand debate around regional trade agreements (and does not appear in the government’s National Interest Assessment).

Rose also highlights a number of other potential problems in the TPP

Trade agreements should not include labour or / and environmental standards as they, for example, limit our right to deregulate our labour market. Be careful what you wish for when you oppose international agreements on sovereignty grounds.
The intellectual property chapters of the TPP are truly suspicious. With each new day, the case for patents and copyrights is weakening in the economic literature. Some have made powerful arguments to abolish patents and copyrights altogether.
There are modest extensions of the term limits of drug patents and much more mischief on copyright terms. These should be watched carefully in future trade talks and one day will be a deal breaker.
Good arguments can be made against investor state dispute settlement provisions even after the carve-outs. These provisions have no place in trade agreements between democracies.

Notwithstanding all this, Rose’s bottom line is

For this lukewarm opponent of regional trade agreements, the TPP is a so-so deal with small net gains. There is no harm in it signing it.

I’m not entirely sure why he feels safe in concluding that there are net gains, but he appears to put some reliance on the modelling work suggesting that reductions in tariffs and non-tariff barriers will have some beneficial economic impact for New Zealanders.

Another independent consultant, Ian Harrison, has today released a fairly critical evaluation  (trenchantly headed “Garbage In, Garbage Out”) of the modelling work, on tariffs and non-tariff barriers, that was done for MFAT and the government.  That modelling is the basis for the government’s claims about the scale of the economic benefits the agreement offers.

Ian has gone back and looked at some of the papers that underpinned the assessment of the possible gains from the reduction/elimination of non-tariff barriers and improvements in trade facilitation (eg reducing customs clearances delays).  In fairness, the authors of the MFAT modelling do discuss how shaky much of this work inevitably is –  since there are not good, or agreed, metrics for non-tariff barriers (in a way that there are for tariffs),  but the rather shaky foundations seems to have been obscured in the politicized debate around the size of any benefits.  And the original authors seem to have done, or reported, little in the way of either sensitivity or plausibility analysis around the metrics they were using.

The Harrison paper suggests that the inputs are sufficiently flawed –  suggesting, for example, that New Zealand and Australia start with some of the highest non-tariff barriers around  –  that no serious evaluation of any gains from TPP can be done using them.  It is a difficult paper to excerpt, but I would suggest reading it.

Harrison also argues that there something distinctly odd about the estimated trade facilitation benefits, estimated at $357 million per annum.  He highlights the hugely, and implausibly, high estimates that appear to be assumed for the value of clearing products just a few hours earlier.  For some goods, those estimates might be very large –  but for most of sorts of products New Zealand trades in they won’t be.  If Harrison is correct, the model assumes, for example,

that an  oil importer values oil received in 30 days time at a third less than oil received today because of the time value effect.

The non-tariff gains dominate the estimated benefits in the National Interest Assessment.  But Harrison also comments more briefly on the estimated benefits from reduced tariffs and increased (export) quotas

harrison

Perhaps Harrison is missing something, but on the face of it this report seems to reinforce the case for an independent assessment of the economic costs and benefits of the deal, as finally agreed, perhaps by someone like the Productivity Commission.  It is hard to do such an exercise well –  a point Rose makes –  and reasonable people will still likely differ, but for such an extensive agreement it should be an almost automatic step in the process if we are serious about considered evaluation of policy.

The issue now isn’t really whether the deal should be ratified by the New Zealand government, but whether –  having been agreed – it represents a good deal for New Zealanders.  Regional trade deals often haven’t been.  Perhaps this one is different.  But without the detailed analysis and scrutiny it will be difficult to know.