Day: November 8, 2018

Inching towards greater transparency

Michael Reddell Reserve Bank Act reforms, Transparency, Uncategorized

Several years ago the then Reserve Bank Governor went public when there was some criticism around an OCR decision (more so about communications surrounding it) telling us that all his advisers had on that occasion supported his decision.   A group of senior staff provide written advice at each OCR decision.

If it was good enough for him to disclose such information when it suited him, I thought it should be fine to have the information disclosed routinely, including for OCR decisions some time in the past.  I lodged an OIA request accordingly.

Not that surprisingly, given the Bank’s approach to the OIA, I didn’t get anywhere.  They refused to release any other information about previous OCR decisions and, a bit more surprisingly, [as I recalled things, but see below] they managed to get the Ombudsman to provide cover for their refusal.

But in this morning’s Monetary Policy Statement we find almost exactly the data I requested 2.5 years ago, in the form of this chart.

OCR advice

Kudos to the Governor for releasing the information, even (a) this belatedly, and (b) only for the period to the end of 2016, which is now two years ago.  We still have no idea what the balance of advice has been over the last couple of years, most of which wasn’t even in the current Governor’s term.  But it is better than nothing.

I was among this group of advisers up to and including the March 2014 decision –  where I’m pretty sure I was the grey vote (opposed to the OCR increase).

Given that the Governor has now released so much information, I’m tempted to lodge another OIA request for the more recent information –  there cannot possibly be any market sensitivity or other problems (defensible under the Act) in knowing that (say) one advisor out of ten favoured an OCR cut six months ago –  but as the legislation is about to change perhaps I will leave it for now.

The Governor goes on to note that

Generally, there was a clear majority in the balance of advice. Should the current Reserve Bank Amendment Bill become law, our intention would be to publish the formal votes of the Monetary Policy Committee each time a vote is taken. It is envisaged that a vote would not be called for every meeting, but only when needed.

I found this mildly encouraging, Until now that rhetoric has tended to emphasise very heavily the consensus model the previous Reserve Bank management favoured (under which any differences of view –  inevitable in a well-functioning organisation dealing with so much uncertainty –  would be obfuscated and kept secret).  At least now there is a straightforward explicit statement that the formal votes will be published when such votes are taken.   It still isn’t too late for the select committee looking at the bill to amend the legislation to require votes to be taken, and require the number of votes for each position to be published.

There is still a long way to go in getting the Reserve Bank to the point of operating transparently, even reaching (say) the level managed by the Treasury through the Budget process.  I still have an Official Information Act request in, now with the Ombudsman, over the Reserve Bank’s refusal to release background papers underpinning claims it made (including around KiwiBuild) in last year’s November Monetary Policy Statement.   The Bank has long argued that it would be destabilising, undermining the effectiveness of policy, if anyone ever saw any internal background papers.    They claim, citing the OIA itself, that the substantial economic interests of New Zealand would be damaged.

Some months ago the Ombudsman advised a preliminary view that would have continued his office’s longstanding practice of allowing the Bank to keep almost anything associated with monetary policy secret.  I made a submission in response that highlighted what appeared to be a serious inconsistency in the way, for example, budget papers are treated.  This was some of what I wrote

In general, I think Mr Boshier’s provisional decision, if allowed to stand, would seriously detract from effective accountability for the Reserve Bank, and in particular would expose the Bank routinely to less scrutiny and challenge than Cabinet ministers or government departments receive.  That cannot be the intention of the Act.    That parallel doesn’t seem to have been taken into account at all in the draft determination.
Thus, Cabinet papers underpinning key government announcements are frequently released, sometimes in response to OIA requests and at other times pro-actively.  But so too is advice to a Cabinet minister from his or her department.  That is so even when, as is often the case, officials have a different view on some or all of the matters for decision from the stance taken by the minister.   A classic example, of course, is the pro-active release of a great deal of background material, memos, aide-memoires etc compiled and submitted as part of the Budget formulation process.  Many of the working papers in that case may never even have been seen the Secretary to the Treasury but will have been signed out to the office or minister at the level of perhaps a relatively junior manager.  Many will have been done in a rush, and be at least as provisional as analysis the Governor receives in preparing for his OCR decision.  I’ve been personally involved in both processes.
Is it sometimes awkward for the Minister of Finance that his own officials disagreed with some choice the minister made?  No doubt.  Do ministers sometimes feel called upon to justify their decisions, relative to that official alternative advice? No doubt.  But it doesn’t stop either the provision of such dissenting (often quite provisional) analysis and advice, or the release of those background documents.
The sorts of arguments the Reserve Bank makes, and which Mr Boshier appears to have accepted, could well be advanced by Cabinet ministers (eg clear messaging about this or that aspect of budgetary or tax policy –  all of which are substantial economic interests of the NZ government).  If they have advanced such arguments, they have generally not succeeded.  And nor should they.  Doing so would undermine effective accountability or scrutiny, even though the Minister’s formal accountability might be to Parliament (he has to get his Budget passed).
The relationship between the Minister and his or her department officials is closely parallel to that between the Governor of the Reserve Bank –  the sole legal decisionmaker (who doesn’t even have to get parliamentary approval of his decisions) –  and the staff of (in this case) the Economics and Financial Markets departments of the Bank.  One group are advisers, and the other individual is the decisionmaker.  The fact that they happen to both part of the same organisation, doesn’t affect the substantive nature of that relationship.   Manager and senior managers in the relevant departments are responsible for the quality of the advice given to the Governor, in much the same way that the Secretary is responsible for Treasury’s advice to minister (and at his discretion can allow lower level staff to provide analysis/advice directly to the Minister or his office.   I would urge you to substantively reflect on the parallel before reaching your final decision, including reflecting on how (if at all) official advice on input to the OCR is different than official advice (including supporting analysis) on any other aspect of economic policy.
Mr Boshier’s argument about potential damage to substantial economic interests itself seems insubstantial, and displaying little understanding of how financial markets (and the market scrutiny of the Reserve Bank) work.  It also appears to be based wholly on official perspectives; officials who will routinely oppose transparency (except as they control it).    All those who follow, and monitor, the Reserve Bank recognise that there is a huge degree of uncertainty about any of the assumptions the Bank (or other forecasters) make, Indeed, the Bank itself stresses that point.    Markets trade changing perceptions of the outlook all the time, each piece of new data slightly adding to the mix.   Most monitors of the Reserve Bank (many of whom have previously worked for the Bank) recognise the distinction between analysis and advice, provided as input to the Governor, and the Governor’s own final decision and communication thereof.    And since markets –  and the Bank –  know that any projections are done with huge margins of uncertainty, the pretence that economic outcomes could be substantially damaged by people knowing there were a range of views or analysis is almost laughable.  Again, there is also a distinction to be considered between possible institutional interests of the Reserve Bank and the substantial economic interests of New Zealand.   You seem to treat those two sets of interests are the same thing, but they are not.

Given that some more months have now passed I hope the Ombudsman is seriously considering these arguments.   But whether he is or not, I call on the Governor to take seriously his words about greater openness and more transparency, and put in place proactively a new regime (perhaps for the new MPC) in which staff background papers provided to the Governor and MPC are released, with a suitable lag (perhaps four to six weeks) as a matter of course.  Doing so would be a significant step forward, and should help to boost market and public confidence in the Bank.  It wouldn’t be terribly radical; it is pretty much what is done for the government’s Budget each year.  Perhaps the new Treasury observer could explain to his Bank colleagues how it works, and how Treasury continues to function, continues to offer free and frank advice, even knowing that in time the background work will most probably be open to scrutiny.  It is how open democracies, open societies, should work.

I might have some other thoughts tomorrow on more substantive aspects of the Monetary Policy Statement.

UPDATE:  Well, it seems that credit is due to the Ombudsman not to the Governor. A few minutes after putting this post, I received this letter from the Bank

Dear Mr Reddell

At the invitation of the Chief Ombudsman, the Reserve Bank has reconsidered your request for the aggregate numbers of MPC members favouring each rate option for each OCR decision since mid-2013. You made this request on 14 March 2016.

On the basis that the requested information has become sufficiently historic, the Reserve Bank has decided it can now release the information. You can find the information on pages 13-14 of today’s Monetary Policy Statement at the following web address www.rbnz.govt.nz/monetary-policy/monetary-policy-statement.

 

 

 

Perhaps standards are different in Rotorua?

Michael Reddell China, NZ politics, Uncategorized

When you think that our politicians can’t sink much lower when it comes to matters related to the dreadful regime in Beijing all one has to do is wait another day or two.

Stuff has a major piece (a double page spread in this morning’s Dominion-Post) about the situation of the Uighur people in Xinjiang province in China, focusing on the stories of some of the Uighurs now living in New Zealand.

But what I wanted to highlight was the reaction of our politicians, National Party foreign affairs spokesman (and MP for Rotorua) Todd McClay in particular (emphasis added).

Ardern’s office didn’t respond to questions. Foreign Affairs Minister Winston Peters is overseas and also couldn’t comment.

“Abuses of human rights are a concern wherever they occur,” says National’s Foreign Affairs spokesperson Todd McClay, “however, the existence and purpose of vocational training centres is a domestic matter for the Chinese Government.”

McClay adds that “if credible evidence of human rights abuses came to light,” National would expect the government to “make representations to China through formal channels”.

The Chinese embassy did not reply to any questions about the issue.

So neither the Prime Minister nor the Foreign Minister would comment (in this era, being overseas is not a justification for saying someone “couldn’t” comment).    We saw the Prime Minister’s own feeble stance on this issue a couple of weeks ago

She said she might raise her concerns at a future meeting with Chinese officials, but made no firm commitment.

But McClay’s stance plumbs whole new depths.   Had he said “look, we know Beijing is an awful regime and often treats its citizens abominably, but we really want an upgraded FTA”, that would be bad enough, but at least it would be honest.  Instead he adopts the chilling language of the regime itself, suggesting that these (forced) internment and indoctrination camps are “vocational training centres”, and that the accompanying intense surveillance and control regime (electronic surveillance, let alone the government spies Uighur families are forced to host in their own houses) is just as nothing.  Does he suppose that the million of so people locked up in these centres are there voluntarily?  What bits of the evidence of systematic abuse and repression does he not believe?  Or, more probably, does he just not care?

All manner of brutal regimes have had Western apologists.  But history tends not to look very kindly on them.   And this man sits in our Parliament –  alongside Jian Yang –  aspiring to again be a senior Cabinet minister.  In my view, anyone that senior who sinks that low should never be allowed anywhere near the reins of government.  He disgraces himself, and disgraces a once-decent and honourable party.  The same party whose current leader last year, as a senior government minister, signed up with Beijing to some sickening aspiration to a “fusion of civilisations”.

To be clear, the current government seems no better, content to sit by as evil happens, even if not quite so sickeningly crass in their wording as Todd McClay.

As the Stuff article notes, more or less in passing, China’s human rights record has been under review in Geneva this week (part of a five-yearly review that all UN members face).   I’m no great fan of the United Nations or its associated bodies, and the Human Rights Council seems to be mostly a sick joke.  Nonetheless, these forums –  the Universal Periodic Reviews –  do pose the opportunity for other countries to ask (openly) searching questions about evident or apparent abuses.    A leading US China scholar wrote about it on his blog

On Nov.6, the People’s Republic of China underwent its third UN Universal Periodic Review (UPR), which is a peer review at the Human Rights Council of China’s human rights record. Each country, ridiculously, only had 45 seconds to speak! All eyes were watching if China’s mass incarceration of Muslims in Xinjiang and related repression outside the detention prisons would be criticized. Many countries did speak out, including the U.S., Canada, Germany and the UK. The only Muslim country that raised this issue is Turkey. It is shameful that Muslim countries and their regional organizations have done so little to date. The PRC cleverly lined up a large number of sycophant states to sing its praises and take time away from states that wanted to be critical. (All UPR-related documents are here at the UN’s website.)  The PRC has moved relentlessly to increase its influence over the Human Rights Council while the U.S. has withdrawn from it. Accordingly, many countries, including developing and authoritarian countries that rely on China’s economic ties, lavished high praise on China’s human rights achievements, instead of treating the session seriously.

But in addition to the 45 seconds, individual countries could lodge written questions.  Many did.    From our traditional allies, there was (a selection in each case)

The UK asking

  • When will the Government implement the recommendations made by the UN Committee for the Elimination of Racial Discrimination regarding Xinjiang Autonomous Uyghur Region, including to: halt the practice of detaining individuals who have not been lawfully charged, tried, and convicted for a criminal offence in any extra-legal detention facilities; immediately release individuals detained under these circumstances; eliminate travel restrictions that disproportionately affect members of ethnic minorities; and provide statistics on the numbers of those held involuntarily in the past 5 years?
  • What steps is the Government taking to ensure that freedom of religion or belief, freedom of movement, and cultural rights are respected and protected for all religious and ethnic groups in China, particularly those in Tibet?
  • What steps is the Government taking to ensure that lawyers, activists, journalists and human rights defenders including Wang Quanzhang, Yu Wensheng, Jiang Tianyong, Li Yuhan, Gao Zhisheng, Tashi Wangchuk, Ilham Tohti, Wu Gan and Huang Qi are protected from harassment, mistreatment and discrimination, and that those detained for merely exercising their constitutional rights are released without delay?

And the US

  • Can China provide the number of people involuntarily held in all detention facilities in Xinjiang during the past five years, along with the duration and location of their detention; the grounds for detention; humanitarian conditions in the centers; the content of any training or political curriculum and activities; the rights detainees have to challenge the illegality of their detention or appeal the detention; and any measures taken to ensure that their families are promptly notified of their detention?
  • Can China clarify the basis for its apparent criminalization of peaceful religious practices as justification to detain people in these political “re-education” camps in Xinjiang, as well as which officials are responsible for this policy?
  • Since the Chinese constitution guarantees religious liberty, what steps is China taking to stop the continued repression of religious freedom, such as increasingly strict regulations being passed or proposed on religious activity China has passed or proposed, the detention and mistreatment of Falun Gong practitioners, and the church closure and demolition campaigns seen in multiple provinces throughout the country?
  • What is China doing to end the unlawful practices of torture, secret detentions, and detention without due process halt the practice of detaining individuals who have not been lawfully charged, tried and convicted for a criminal offense in including Wang Quanzhang, who has been held incommunicado for over three years without an open trial, and Swedish citizen Gui Minhai, who was released in 2017 and redetained in January 2018?

And Australia

·                 Paragraph 4 of China’s 2018 National Report states that “there is no universal road for the development of human rights in the world”, with the relevant section headed “human rights with Chinese characteristics”; in contrast China’s 2013 report stated “China respects the principle of universality of human rights”.

Does China still accept the principle of universal human rights, and if not, can China explain how its conception of human rights fits into the international human rights regime built on the concept of universality? Can China explain how “human rights with Chinese characteristics” differs from universal human rights, and if it does not, why it wishes to introduce this distinction?

 ·                 Australia is concerned about reports regarding the arbitrary detention of Uighurs and other Muslim groups in Xinjiang, and the lack of transparency and access for members of the international community, including monitors from the United Nations Office of the High Commissioner for Human Rights.

What steps is China taking to ensure that the concerns raised by the United Nations Committee for the Elimination of Racial Discrimination (CERD) are being addressed in an open and transparent manner?

And what of New Zealand?   Perhaps our diplomats used their 45 seconds in a courageous and searching intervention?  But there was no sign of any advance written questions.  No sign our government cares even a little.

It isn’t even as if this is some left vs right issue.  Human Rights Watch and the United Nations are alarmed by what is going on, but so (according to a piece in my inbox this morning) is the libertarian think-tank the Cato Institute.     Can we make a difference?  On our own no, although us speaking up (even quietly) would probably lead Beijing to sit up and take a bit of notice – if even their pet Caucasians (a description someone passed on) are willing to speak, perhaps we need some different tactics? – but sometimes you just have to do what is right.

I’m going to end as I ended a post last week

The Churchill quote – from his famous ‘iron curtain” speech – is very apposite, but in the specific New Zealand context, and the way our politicians court the regime and fear doing or saying anything even slightly controversial, the commentator’s own line was a nice place to end.

It comes back to the values, not bank balances, we want to have for ourselves and for our children.

Perhaps ethics, morality and decency mean something different in Rotorua. But I’m pretty sure it isn’t that.  It is just that they seem to mean something different at the top of our two main political parties.