Many readers will recall the fiasco of the leak of an OCR announcement back in March 2016. It turned out that the Reserve Bank’s systems were had been so lax for years that people in the lock-ups they then held could simply email back to their offices (or to anyone else) news of the announcement that was supposed to be being tightly held. This weakness only came to light because someone in Mediaworks emailed the news of this particular OCR announcement to their office, and someone in that office emailed me (from memory I was supposed to go on one of their radio shows later that morning). I drew the matter to the Bank’s attention.
In the wake of that episode, the Bank (rightly in my view) cancelled the pre-release lock-ups for journalists and analysts. But other government agencies went right on, relying on trust more than anything else. One notable example was Statistics New Zealand, which produces and publishes many of the most market-moving pieces of economic data. When asked about any possible changes to their procedures (outlined here) following the Reserve Bank leak in 2016, they responded
Statistics NZ has not undertaken any reviews or made any changes to the department’s policy for media conferences following the Official Cash Rate leak at the Reserve Bank of New Zealand and the subsequent Deloitte report into that leak released last week.
While Statistics NZ has never had a breach, if that trust is abused and an embargo is broken, offenders and their organisation would be barred from attending future media conferences.
As I noted back then
Unfortunately, that was probably the sort of discipline/incentive the Reserve Bank was implicitly relying on as well.
Unfortunately, after the confusion the Prime Minister gave rise to earlier in the week, confusing the crown accounts and GDP (which had some people abroad worried that the Prime Minister actually had had an advanced briefing), there was apparently more trouble this morning. But this time, the fault was entirely with Statistics New Zealand, and not with those in the lock-up.
The embargo for the lock-up on gross domestic product (GDP) for the June 2018 quarter, held today, 20 September 2018, was lifted about one minute earlier than the planned time of 10.45am.
The lock-up is held in Stats NZ’s Wellington offices from 10am to 10.45am, to allow key financial media, bank economists, and other government agencies to understand the information and ask questions about GDP, before the embargo is lifted. It is held under strict embargo conditions.
Stats NZ staff in the lock-up check official New Zealand time on the Measurement Standards Laboratory of New Zealand (MSL) website.
In other words, those in the embargoed lock-up had the data – and could communicate it to their dealing rooms – a minute earlier than anyone not in the lock-up got the data. And it seems to have mattered. GDP was higher than expected and the exchange rate jumped. People who were in the lock-up got the jump on that. I’ve heard that the exchange rate moved before 10:45 (the official release time), which isn’t surprising if people in the lock-up had been told the embargo had been lifted.
What is striking about the statement SNZ put out – and it wasn’t exactly distributed widely (say, to all the people who got the GDP release itself) – is that there is no mention at all of these possible early trades, which (in effect) distributed money/profits from one group of people (those not in the know) to another (those in the know). Unlike the 2016 Reserve Bank leak, there seem to have been real financial consequences to this mistake. And it isn’t clear that Statistics New Zealand is taking it that seriously. When I asked about any investigation being undertaken, the implication of their reply was that there would be no further investigation or review beyond the narrow technical statement I linked to earlier. I hope that is not correct (and I hope, for example, the Reserve Bank is insisting on something more).
Writing about these data lock-ups in 2016 I noted of the SNZ situation
Is Statistics New Zealand that different? There is, obviously, no policy message SNZ is trying to put across with its releases, and so no risks of different messages getting to different people. But the security risks are the same. Perhaps it is simply more efficient to have everyone in the same room, to clarify key technical points, but couldn’t the same end be achieved – on a more competitively neutral basis (to analysts based abroad, say) – by a dial-in (even webcast) conference call held a bit later on the day of the release?
That still seems right to me. I cannot see the case for a pre-release lock-up (and I can see a case for a technical conference call later in the day). Mistakes will happen while they keep on with lock-ups. The reliance on trust seems to be as strong as ever, and (as far as we know) that has been honoured. This time, the stuff-up was by Statistics New Zealand themselves. It was unnecessary, and it will at the margin (and especially in conjunction with the political contretemps earlier in the week) damage confidence in our statistics agency and the integrity of our data.