Five weeks ago now, on 7 November, the Minister of Finance announced a process for his review of the Reserve Bank Act. There was to be a two-stage process: the first stage led by Treasury to come up with specific recommendations on how to implement the Labour Party promises around monetary policy (goal and decisionmaking issues), and then an amorphous second stage, to be jointly led by the Reserve Bank and Treasury, to look at other – as yet undefined – issues around the Reserve Bank Act. We were told that the phase one would be completed, with a report to the Minister, in early 2018.
Presumably the work is well underway. At the post-Cabinet press conference the other day, we were told that the new Policy Targets Agreement – which has to be signed by the Minister and the Governor-designate before Adrian Orr can be formally appointed – will be informed by the recommendations of the first phase of the review. As Orr is scheduled to take office on 27 March, you’d have to suppose that the report of the review would have gone to the Minister of Finance at least a couple of weeks prior to that. After all, Orr himself would need to consider any proposed changes to the PTA, and might wish to take his own advice from Reserve Bank staff.
But if the work is well underway it is being kept very secretive, something that seems quite out of step with how things were portrayed when the Minister announced the terms of reference and associated process five weeks ago.
For example, we were told that an Independent Expert Advisory Panel was to be appointed. According to the Q&A sheet issued on 7 November
Who will be on the Independent Expert Advisory Panel?
The panel members will be announced once they have been confirmed, but they will be individuals with independence and stature in the field of monetary policy, including in governance roles.
But there has been no announcement. Either members haven’t been appointed yet – in which case, how is the work going to be well done in the remaining time? – or the Minister has gone back on his commitment to openness. I have Official Information Act requests in with both Treasury and the Minister seeking the names. The expectation of openness was confirmed with this q&a
Will their views be made public?
In commissioning the review, I have asked officials for advice on the terms of engagement of the Independent Expert Advisory Panel. This will include how their views are made public, and further details will be made public once that has been confirmed.
Note the “how”, not “whether”. But, five weeks on, still no details.
The Minister also promised more details about a timeline for the whole review. Five weeks on, heading into Christmas, still no details. At yet the first stage is supposed to be completed by early March.
When will it conclude/report?
I expect the Treasury to report to me on phase one of the review early in 2018.
In commissioning the review, I have also asked officials to develop a detailed timeline for the review, and more details will be provided once they have been agreed.
I had supposed that the review would be seeking submissions or public input. I wondered if that was just my imagination, but no. Going back to the Q&As
Will there be public consultation? When?
I have also asked officials to develop a detailed timeline for the review, including how public consultation can best be facilitated. More details will be made public once they have been agreed.
Five weeks on, heading into Christmas, still nothing. If the underlying review by officials is well underway, it makes a mockery of any sort of public consultation if views are only to be invited very late in the piece, if at all.
I’m not sure what the Minister of Finance can possibly have to hide. The Labour Party campaigned on making changes along these lines, and the first stage of the review is supposed to be largely about giving that effect, and associated consequential issues. But whatever the reason, it isn’t a particulary look, and again undermines any suggestion that the government might be committed to a more open approach. Rhetoric around the Official Information Act is fine, but this stuff should be easy – and it was explicitly promised weeks ago, in a review that is operating to tight timeframes.
It also isn’t clear why the Minister and Treasury are still keeping secret the Rennie review and associated documents. The Rennie review of Reserve Bank goverance was commissioned by Treasury, at the request of the previous Minister of Finance. The report was completed in April, and yet Treasury has repeatedly refused to release it and associated material (eg comments from expert reviewers), even though it is clearly official information and should be highly relevant to discussion/debate/submissions around the new government’s own proposals and review. I have appealed the latest denial to the Ombudsman, and had confirmation this morning that the Ombudsman has opened an investigation. But such investigations simply shouldn’t be needed, if we had any semblance of an open government.
As noted above, a new Policy Targets Agreement has to be agreed and signed by March. The Policy Targets Agreement is the major document guiding short-term stabilisation policy for the next five years – it affects us all. And yet it seems that deliberations will continue to go on in secret (as has been the custom). Again, it would be a good opportunity for a more open approach. I’ve pointed previously to the Canadian model of conducting the research leading up to the renewal of the inflation target early and openly discussing/reviewing/debating it in public seminars/workshops. It would be a good practice to adopt here, but it is probably too late for this time round. But it wouldn’t be too late for the papers the Reserve Bank and Treasury have inevitably already prepared on the topic to be made public, in a way that would enable market economists and other observers to provide input on how this major macroeconomic tool is to be specificied and managed for the next five years. We’d never pass legislation as secretly as the PTA is done. Indeed, the Reserve Bank couldn’t even put on the latest iteration of LVR controls – half-life perhaps one year – without proper serious consultation. It is time for a more open and consultative approach to shaping macroeconomic policy. Robertson (and Orr) could lead the way.
In addition to the work Treasury and Reserve Bank staff have done, consultation could take account of the comments the Minister made recently about contemplating removing references to the target midpoint from the PTA (I have mixed feelings about that idea, but think it is probably a bad idea, reinforcing the weakness of inflation expectations). And there were other suggestions at the post-Cabinet press conference – Robertson talking of how the government doesn’t just want the Bank to focus on price stability, or employment, but on “the overalll wellbeing of New Zealanders” – that dread Treasury phrase once again, as devoid of specific meaning as ever. But in case he isn’t aware, the 4th Labour government already included its own “virtue signalling” mandate in the Reserve Bank Act
169 Bank to exhibit sense of social responsibility
It shall be an objective of the Bank to exhibit a sense of social responsibility in exercising its powers under this Act.
38 years on and still no one knows what it means, if anything. But it probably felt good to include it. Perhaps those words could be carried up into the Policy Targets Agreement, and the Governor could cite them every so often?