Immigration data: some questions

For several years now I’ve been complaining about the inadequacies of MBIE’s administrative immigration approvals data.   It really should have been easy to have this data readily available (including in SNZ’s Infoshare platform) very quickly: we manage it, for example, for building approvals.   But it hasn’t been.

For a long time, the public was supposed to be content with the annual Migration Trends and Outlook publication.  It had a lot of interesting and useful data but (a) it was only available on an annual basis and (b) the lags were quite long.  They also made available gigantic spreadsheets which might have been readily useable for those with programming skills or the right software, but for humbler analysts required a significant investment of time to extract the simplest numbers.  And then those spreadsheets themselves were withdrawn –  they discovered, belatedly, some privacy issues.  They in turn were replaced with big PDF documents in small fonts where you could find some of the data updated each month, but still with an annual focus (thus they report year to date data, rather than monthly data).

There is progress afoot.  MBIE has spent a lot of time and resource developing a Migration Trends Dashboard which will, when it finished, finally get us to the point of having timely, useable, monthly data, seasonally adjusted where appropriate.  The sort of standard we’ve long expected for other major statistical series.   I’ve been invited to a couple of consultation sessions with them as the product has been developed and although the dashboard has not yet been formally launched they’ve told me they have no problem if I run some graphs here from the dashboard. (Because it isn’t yet officially launched, and it doesn’t yet work with all browsers, I won’t link to the dashboard here, but if anyone really wants the link to have a play with the data, email me –  address in the “About Michael Reddell’s blog” tab.)

This is the sort of thing that will be readily available: residence approvals by application stream.

R1 Residence Decisions by Application Stream (1)

This is calendar year data, so note that the final observations are only for 10 months.  But even if you scale those numbers up (by 6/5) what is unmistakeable is how sharp the reduction in the number of residence approvals granted in the business/skilled streams –  centrepiece of our economics-focused immigration programme –  has been.    I wrote first about this development a couple of months ago, somewhat puzzled by quite what is going on –  given that there was a small reduction in the residence approvals target last year, but nothing subsequently.

Unfortunately –  I guess it is still a prototype –  the November numbers haven’t yet been loaded in the Dashboard, so I had to go back to the more timely –  if less wieldy –  big PDFs, where the data is in financial year (to June) format.

residence approvals 2018.png

I’ve annualised the five months of data we have for 2018/19 to date.  At present approval rates we are on course for a slightly lower rate of approvals in 2018/19 than we had in 2017/18 –  both below official announced target (centred on 45000 approvals per annum).    Those would be the lowest number of approvals this century to date.

I remain a bit puzzled quite what is going on, and I’d have thought someone should be grilling the Minister of Immigration for answers.  There is an official target and it is not even close to being met.

Here is an update of a chart I ran a couple of months ago of the nationalities of those granted residence approvals (again the 2018/19 numbers are annualised).

residence approvals by nationality

What is striking is the reduction in the number of Indian and (even more so) Chinese approvals.

As I noted in the earlier post

I’m puzzled.  And, of course, I’ve spent years calling for a reduction in the residence approvals target, so in one sense I’m not unhappy to see the reduced numbers.  But I also strongly favour open and transparent policy, and there has been nothing announced suggesting that we should have been expecting –  or that the government was seeking –  such a large reduction in the number of residence approvals being granted.

And the number of points required to get residence is supposed to operate as a quasi-price: if too many “good” applicants are applying, the logic is supposed to be that the points threshold is raised, and if not many applications are coming in, the points threshold is supposed to be lowered.  But I’m not aware of any steps having been taken –  lowering the threshold –  this year.

One possibility is that although the government was not willing to openly take steps to reduce the inflow of (permanent) migrants, they (or at least parts of the government) were not unhappy if the inflow declined anyway.   And even among those champing at the bit for lots of migrants –  one might think of the Prime Minister –  perhaps there is some unease that announcing a reduction in the points threshold might reawaken a debate about the relatively low-skilled nature of many of our (notionally) skilled migrants.   These, after all, were the top occupations for the skilled migrant principal applicants from the most recent Migration Trends and Outlook.

Main occupations for Skilled Migrant Category principal applicants, 2016/17  
   
Occupation 2016/17
Number %
Chef 684 5.7%
Registered Nurse (Aged Care) 559 4.6%
Retail Manager (General) 503 4.2%
Cafe or Restaurant Manager 452 3.7%

And finally, a couple of other snippets of what we are better able to see with the new Dashboard.   This chart shows the number of first-time student visas granted to people from each of the two largest markets, China and India.

student visas FSV

I’d been aware that Indian student numbers had fallen sharply, although the numbers there appear to have stabilised.     The China market, however, is much more important for our universities and I hadn’t been aware that the number of first-time visas for PRC students had also been falling away for a couple of years now; so much so in fact that almost the whole of the boom has reversed.    No doubt the Vice-Chancellors will be even more concerned to keep pressure on the government not to say or do anything that might upset the regime in Beijing, no matter how egregious it is.

That chart is about flows –  first time arrivals.  The stock of foreign students takes longer to adjust, but here from the Dashboard is a chart of the stock of full fee paying student visa holders in New Zealand.

Counts by Full fee paying

And last of all, this is the stock of people in New Zealand with current work visas.  Whatever is going on around residence approvals, the number of people with short-term work visas continues rise pretty strongly (although, interestingly, when I dug down a little, the number of people here on working holiday visas has fallen back a bit from peak).

Counts by Total (Work)

When it is finished, MBIE’s new dashboard will be a significant step forward.  Even now we are beginning to get more information, on a more timely and accessible basis.  That is welcome.  But the better data unables us to pose some as-yet-unanswered questions including (particularly) just what is going on with the centrepiece of our immigration policy, the residence approvals programme.

(And while I’m awarding ticks –  well half-ticks anyway –  for this data, we shouldn’t lose sight of the loss of the data about the comings and goings of New Zealanders.)

HYEFU bits and pieces

This is getting to be a bit of a half-yearly ritual, but politicians’ words are one thing, and the best professional judgements of our Treasury forecasters are another.   The latter aren’t necessarily very accurate at all, but as their website blares

The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy

Heaven help New Zealand you might think, given that both Treasury and the government seem lost in the nebulous alternative reality of the living standards framework, wellbeing budgets, and a grab bag of alternative indicators that may –  or may not –  matter to anyone much other than them.

But they are the official advisors, charged by law with producing independent forecasts twice a year.   And the forecasts I’ve been particularly interested in for a while have been those for the export (and import) share of GDP.  The previous government, somewhat unwisely set themselves numerical targets for the export share of GDP –  reality bore no relationship to the targets.  The current government avoided that particular mistake, but senior ministers –  all the way up to the Minister of Finance and the Prime Minister –  talk regularly about rebalancing the economy and gettings the signals right in ways that lead to more exports and higher productivity.

But here are the numbers, for exports as a share of GDP, from last week’s economic and fiscal update.

exports hyefu 18

You can read the earlier decades in various ways.   If you wanted to be particularly negative you could note that we got to an export share of GDP in 1980 which we haven’t sustainably exceeded since then.  But if you were of a more charitable disposition you might suggest that, broadly speaking, things were still getting better until about 2001 (although you shouldn’t put much weight on that peak –  it was an unusual combination of a year of a very weak exchange rate and very high dairy prices).  But this century hasn’t been good, and this decade has been bad.

As a reminder it isn’t that exports are in some sense special, but that successful economies typically have plenty of growing firms that are producing goods and services that are making inroads in the very big market of the rest of world.  That, in turn, enables us to enjoy for of what the rest of the world produces.   For small economies in particular, exports are typically a very important marker.

If you were of a generous disposition you might note that a temporary dip in the export share of GDP might not have been unexpected, or even inappropriate, for much of this decade.  After all, the Canterbury earthquakes meant that resources had to be diverted to repairs and rebuilding, and resources used for one thing can’t be used for other things.  The exchange rate is part of the reallocative mechanism.  And the unexpected surge in the population, as a result of high net immigration (a good chunk of it changing behaviour of New Zealanders), arguably had the same sort of effect.

But the largest effects of the earthquake are now well behind us, and even net immigration inflows are also dropping back.   And yet the Treasury forecasts –  the orange line in the chart –  show no sustained rebound in forecast export performance at all.   In fact, by the final forecast year (to June 2023) the export share of GDP will be so low than only one year in the previous thirty will have been lower.  Not only is there no sign of a structural improvement –  a step change that might one day see New Zealand exports matching or exceeding turn of the century levels –  there isn’t even a reversal of the decline this decade, which might plausibly be attributable to unavoidable pressures (eg the earthquakes).

For anyone concerned about the long-term performance of the New Zealand economy –  which appears to exclude our political officeholders, who could actually do something about it, but choose not to –  it is a pretty dismal picture.  Something like the current level of the real exchange rate seems to be Treasury’s “new normal”, and absent huge positive productivity shocks that is a recipe for continued structural underperformance.

Still on the HYEFU, I’ve long been intrigued by the Labour-Greens pre-election budget responsibility commitment around government spending (which continues to guide fiscal policy).

Rule 4: The Government will take a prudent approach to ensure expenditure is phased, controlled, and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.

During the global financial crisis Core Crown spending rose to 34% of GDP. However, for the last 20 years, Core Crown spending has been around 30% of GDP and we will manage our expenditure carefully to continue this trend.

As someone who thinks that there is plenty the government spends money on that just isn’t needed (and eliminating which would, in turn, leave room for some of the areas where more spending probably is needed), this commitment has never really worried me. But then I’m not a typical Labour/Greens voter.

But if it didn’t bother me, it did puzzle me.  Why would the parties of the left, evincing (otherwise) no conversion to the cause of smaller governments, (a) commit themselves to such a relatively moderate share of GDP in govermment spending, and then (b) aim to undershoot that?

Here is what I mean.  In the chart I’ve shown Treasury’s core Crown expenses series as a share of GDP, including the projections from last week’s HYEFU.  I’ve also shown averages for the periods each of the previous three governments were responsible for (thus the former National-led government mainly determined fiscal outcomes for the year to June 2018).

core crown expenses hyefu 18

On the government;s own numbers (and these are pure choices, made by ministers), core Crown spending in the coming five fiscal years (including 2018/19) will be lower every single year than the average in each of the three previous governments, two of which were led by National.   Sure, there was a severe recession in 2008/09 –  not that fault of either main party here –  and then a severe and costly sequence of earthquakes (ditto), but on these numbers government operating expenditure as a share of GDP in 2022/23 will be so moderate that in only two years of the previous fifty (Treasury has some not 100% comparable numbers back to the early 70s) was spending even slightly lower (those were the last two years of the previous government).

It seems extraordinary.

It isn’t as if the economy is grossly overheated (which might suggest a need for considerable caution, since GDP might soon go pop).  Treasury estimates that the output gap is barely positive over the entire projection perion (the numbers so small we might as well just call them zero).   Of course, Treasury (and other forecasters) never forecast recessions, and it seems quite likely that some time in the next five years we will have one.  All else equal, a recession would raise government spending as a share of GDP, but even a 4 per cent loss of GDP in a recession –  which would be pretty severe, similar to 2008/09 –  would only raise the share of spending to GDP by little over one percentage point.   Spending, at the trough of a severe recession, would still be under 30 per cent of GDP –  which was presented in the budget responsibility rules as something they want to fluctuate around, not as an untouchable electric fence.

The only plausible explanation I can see –  after all, the government show no “small government” inclinations when it comes to, eg, regulation –  is the weight they ended up placing on the net debt target.  But that was even more arbitrary than the spending rule.

In isolation, they could spend $5 billion more in 2022/23 and still only have spending as a share of GDP at around the average level of the previous Labour-led government.   Given the low quality of many of the things they are already spending on (fee-free tertiary education, regardless of means or ability, or the Provincial Growth Fund, to take just two examples), I’m reluctant to encourage them.  But it still looks odd.

The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.

Bank capital proposals: a few initial comments

I wasn’t planning to write today about the Reserve Bank’s proposed new bank capital requirements, announced yesterday.  I’ll save a substantive treatment of their consultative document until (after I’ve read it and in) the New Year.   But I found myself quoted in an article on the proposals in today’s Dominion-Post, in a way that doesn’t really reflect my views.  Perhaps that is what happens when a journalist rings while you are out Christmas shopping and didn’t even know the document had been released. But I repeatedly pointed out to him that, despite some scepticism upfront, I’d have to look at documents in full and (for example) critically review any cost-benefit analysis the Bank was providing before reaching a firm view.

The gist of the proposal was captured in this quote from Deputy Governor Geoff Bascand

“We are proposing to almost double the required amount of high quality capital that banks will have to hold,” Bascand said.

Or in this chart I found on a quick skim through the document.

capital requirements

These are very big changes the Governor is proposing.   As I understand it, and as reflected in my comments in the article, they would leave capital requirements (capital as a share of risk-weighted assets) in New Zealand higher than almost anywhere else in the advanced world.

These were the other comments I was reported as making

The magnitude of the new capital required by banks surprised former Reserve Bank head of financial markets, Michael Reddell, who now blogs on the central bank.

A policy move of this scale would have an impact on the value of New Zealand banks, though ASB, BNZ, Westpac and ANZ are all owned by Australian companies listed on the ASX sharemarket.

“If these were domestically listed companies, you would see the impact immediately,” Reddell said.

That would be through a fall in the price of their shares.

Many KiwiSaver funds own shares in the Australian banks.

I think the journalist got a bit the wrong end of the stick re the first comments –  perhaps what happens discussing such things, sight unseen, in a carpark.  In many respects the magnitude of the increase isn’t that surprising given that the Governor had already indicated –  a week or so before –  his desire to have banks able to resist sufficiently large shocks that, on specific assumptions, systemic crises would occur no more than once in 200 years.  That is much more demanding than what previous capital requirements have been based on –  the same ones the Reserve Bank produced a cost-benefit analysis in support of only five or so years ago, and which have had them ever since declaring at every FSR  how robust the New Zealand banking system is.

As for the second half of the comments, they were a hypothetical in response to the journalist’s question about whether higher bank capital requirements would be felt in wealth losses by (for example) people with Kiwisaver accounts who might hold bank shares.  He was uneasy about the line the Bank used that the increased capital requirements were equivalent to 70 per cent of estimated/forecast bank profits over the five year transitional period (of itself, this isn’t an additional cost or loss of wealth).  My point was that if the New Zealand banks (subsidiaries of the Australian banks or Kiwibank) were listed companies, such an effect would be visible directly, because (rightly or wrongly) markets tend to treat higher equity capital requirements as an additional cost on the business, and thus we could have expected the share price of the New Zealand companies to fall, at least initially.    As it is, I’d have thought it would be near-impossible to see any material impact on the share price of the parents (or thus on the value of any shares held in Kiwisaver accounts).

My bottom-line view remains the one I expressed here a couple of weeks ago

Time will tell how persuasive their case is, but given the robustness of the banking system in the face of previous demanding stress tests, the marginal benefits (in terms of crisis probability reduction) for an additional dollar of required capital must now be pretty small.

And, thus, I’m looking forward to critically reviewing their analysis, including in the light of that previous cost-benefit analysis.   Is it really worth compelling banks to hold much more capital than the market seems to require (even from institutions small enough no one thinks a government will bail them out)?

In thinking through this issue, there are some other relevant considerations to bear in mind.  The first is to reflect on just how unsatisfactory it is that decisions of this magnitude are left to a single unelected individual who, in this particular case, does not even have any particular specialist expertise in the subject.  And his most senior manager responsible for financial stability only took up his job a year ago, having previously had no professional background in banking, financial stability or financial regulation.   The legislation is crying out for an overhaul –  big policy decisions like these really should be made by those we can hold to account (elected politicians).    And note that banks have no substantive appeal rights in these matters, even though the Governor is, in effect, prosecutor, judge and jury, and (in effect) accountable to no one much.

The other is to note that there is likely to be very considerable pushback from Australia on these proposals –  both the parent banks of the subsidiaries operating here and, quite probably, from the Australian regulator (APRA) itself.   The proposed new capital requirements here are far higher than those required in Australia (and for the banking groups as a whole).  APRA has adopted a standard that Australian banks should be capitalised so that the system is “unquestionably strong”, but their Tier 1 capital requirement is apparently “only” 10.5 per cent.       Of course, subsidiaries operating in New Zealand are New Zealand registered and regulated banks, and our authorities should be expected to regulate primarily in the interests of New Zealand.   We won’t look after Australia, and they are unlikely to look after us, in a crisis (and coping with crises are really what bank capital is about).  But you have to wonder why we should be inclined to place such confidence in our Reserve Bank’s analysis, relative to that of APRA –  an organisation with (especially now) much greater institutional depth and expertise.  Given the legislated trans-Tasman banking commitments, and the common interests of the two sets of authorities in the health of the banking groups, one can’t help thinking that it would have been more reassuring to have seen the two regulators (and the two governments for that matter – limiting fiscal risks in the event of bank failure) reach a rather more in-common view on the appropriate capitalisation of banks in Australasia.

But perhaps the Governor really is leading the way, supported by compelling analysis.  More on that (superficially unlikely) possibility in the New Year.   In the meantime, for anyone interested, there is a non-technical summary of their proposal (although not of any supporting analysis) here.

The China Council takes the stage

I have good memories of a young Don McKinnon.  It was early 1980, my first year at Victoria University, and Don McKinnon was a first-term National MP.  It was just a few months after the Soviet occupation/invasion of Afghanistan, and there was a strong push from many governments in the West against competing in that (northern) summer’s Olympic Games, to be held in Moscow.   Don McKinnon was invited along to articulate and defend the government’s stance. It was a pretty hostile audience as I recall –  the median student (or perhaps just the median of those who would turn up to lunchtime political meetings) was pretty left-wing (and of those who weren’t so left-wing not many had much time for the then Prime Minister, Rob Muldoon).  I no longer remember many of the details of the event, but I do recall McKinnon vigorously fighting his corner, and making the case that New Zealand athletes shouldn’t be part of one of tyranny’s great celebrations –  first Olympics in a Communist country) in the wake of such egregious aggression.   Those were days of considerably greater moral clarity about such regimes –  no doubt helped by the fact that there was not much trade with the Soviet Union, and our universities weren’t reliant on the Soviet market.

That was then.  Today’s Don McKinnon is full of years, knighted no less.  And any moral clarity on these sorts of issues appears to have been lost long ago.  For these days, Don McKinnon is chair of the (largely) taxpayer-funded New Zealand China Council, set up by the previous government to run propaganda around the People’s Republic of China, and help ensure that public discontent around supping with the devil never becomes too problematic.   Those aren’t their words of course, but the gist of the actual words they do use isn’t that different.     They don’t exist to do foreign diplomacy (that is what we have MFAT for), they don’t exist to do business (individual firms and universities for that, they exist to propagandise New Zealanders –  with our own money.

Mostly, the part-time Executive Director (of whom more below) speaks for the China Council.  But every so often –  perhaps whenever it seems as if a nerve has been touched – they wheel out the chair Don McKinnon.  There was an op-ed in the Herald this time last year, ably responded to by Simon Chapple of Victoria University –  a rare New Zealand academic willing to express scepticism.   Sir Don wanted us to “respect” the People’s Republic of China –  it was never made clear why, given the nature of the regime –  and if there were ever any issues well the great unwashed could trust the “relevant agencies” to deal with them (conveniently ignoring that fact that many of the issues raised by Anne-Marie Brady a few months earlier were not illegal –  they were questions of instead of right and wrong, surely matters for open debate.

Earlier this week Don McKinnon was back in the pages of the Herald.   Straw men abounded.    McKinnon opened with the Hauwei provisional decision taken by the GCSB.  You’ll recall that when decision was announced the China Council put out a statement lamenting the proposed ban.  I’m still a bit puzzled by that statement given that the chief executives of MFAT and NZTE sit on the Council’s Board and were presumably party to this public criticism of one of our intelligence agencies.

In his article this week, Don McKinnon has moved on a bit.

The substance of the decision is not for me to debate, but the risk is that it complicates the already complex management of the trade and economic relationship at a time of geopolitical tension.

but it really isn’t a much better stance from a former Foreign Minister, in a body largely funded by the taxpayer (not Huawei).   Shouldn’t he be lamenting the fact –  unquestioned –  that the PRC is engaged in far-reaching cyber-intrusions and intellectual property theft in much of the world, the sort of approach that might leave anyone cautious about letting a PRC regime-controlled company (as they all are) loose on a 5G network?

But what of those straw men?  This was the opening line of the article

The recent GCSB ruling in respect of Huawei must surely be a body blow for those who allege the Chinese Government and the Chinese Communist Party are influencing New Zealand’s policy-making.

A “body blow”?  Well, perhaps if anyone were claiming that New Zealand governments always and everywhere do what the PRC would prefer.  But I’m not aware of any serious participant in these debates who says that. Beijing probably wasn’t too keen on New Zealand purchasing the P8 aircraft, and would presumably prefer we opted out of Five Eyes too.  But they must be absolutely delighted that former PLA intelligence official, Communist Party member, Jian Yang still sits in our Parliament – even after all that background, and the active misrepresentations to the authorities, is in the public domain.  Or that when new defence policy documents include a few mild but honest words, the only criticism in the political sphere is from an Opposition leader –  himself having signed us up to an aspiration to fusion of civilisations – concerned that the government might upset Beijing.  Or that the government refuses to participate in joint Western efforts to protest the gross abuses in Xinjiang (which the Opposition describe, PRC style, as vocational training camps).  Or that Yikun Zhang, with clear and strong ties to the regime and Party can manage to be awarded –  with bipartisan support –  royal honours for services to New Zealand.  How they must have chortled when they heard that.  Or that both Ardern and Bridges are apparently so scared of a Beijing reaction that neither can manage a forthright defence of Anne-Marie Brady, or of ethnic Chinese New Zealanders being intimidated –  here in New Zealand –  by Beijing.

Don McKinnon purports to believe that none of this is an issue at all.  Apparently we once –  years ago –  mentioned the South China Sea, and that was quite enough.  As for political donations, there are plenty of serious people around –  even people with ties to his own organisation –  who evince unease about that situation –  about, for example, another former Foreign Minister financing his mayoral campaign substantially with anonymous donations from the mainland.   McKinnon isn’t stupid, and will know all this, so one can only conclude he doesn’t care a jot – about the integrity of the political system of his own country.   The 1980 version of Don McKinnon wouldn’t have tolerated a KGB/GRU officer –  never once heard to criticise any aspect of the USSR –  in our Parliament.  2018 Don McKinnon thinks Jian Yang’s presence in Parliament is just fine –  apparently any concerns are “unsubstantiated” (you mean the ones he himself belatedly acknowledged?) –  and has the man sitting on the China Council’s advisory board.

The whole thing is suffused with that determination never ever to upset Beijing –  and whenever anything might (eg Huawei) the emphasis is on the PRC perspective, not the New Zealand one.   This reaches egregious extremes in this observation

National security is important but so too is our increasingly multi-faceted relationship with China.

National security isn’t everything.  Civil liberties and our democracy matter a great deal too.  But for a former longserving Foreign Minister to suggest, in writing (presumably carefuly drafted) that national security is something we should compromise on to keep the regime in Beijing happy is…….extraordinary (and that is probably too mild a word).

And this is one of the problems with the China Council.  They do now often include a ritual line about our “very different values”.  It is there in this week’s article too.  But, strangely –  conveniently for them –  they never ever spell out the nature of those differences.  Doing so might require them to speak or write in a way that suggested disapproval of aspects of the PRC –  or, and I hope this isn’t so, a genuine belief that the PRC system is just as good as our own, only different, and simply nothing to worry about.  So we never hear about (say) the imprisonment of a million or more people in Xinjiang, about fresh attacks on Christians in China, about the widespread theft of intellectual property, about a regime so insecure images of Winnie-the-Pooh are being banned, about the absence of the rule of law, about real military threats to free and democractic Taiwan, about the absence of freedom of speech, or even about the lawless  revenge abductions of a couple of Canadians this week.  Nothing.  And why?  Because there are deals and donations to keep flowing, and none of these things matter a jot –  in the only sense that reveals importance, a willingness to pay a price (probably quite a modest one, if at all).

McKinnon ends with two more incredible comments.  The first was

The risk of overreaction in New Zealand is all too real, however.

Really?  With our supine political and business class, desperate as ever to play the issues down, and no doubt grateful to Sir Don for putting pen to paper.   Some sign of any reaction among our purported leaders would be worthy of note.  But then the China Council’s view of “overreaction” seems to be any reaction whatever –  just let us get on with the deals and donations.  Trust us…..

And at the very end

The short step from rational debate to panic can come at a heavy cost.

So never ever upset Beijing, or the thugs with the baseball bats will extort a price.  But,trust us……they really are good guys, we are better for dealing with them, they’re good guys.  Really.

The thing that really staggers me about the China Council is that with all those senior figures and all that taxpayers’ money the quality and depth of their propaganda and advocacy is so limited.  They might have good practical arguments to make on some points, but making them should involve engaging substantively with the sort of detailed concerns being raised.  The China Council has never made any attempt to substantively engage with Anne_Marie Brady’s paper –  and, shamefully, has been totally silent on the apparent attempts to physically intimidate her (and thus to scare others).  And they are fellow New Zealanders.

As it happens, there was another good example yesterday of our cowering “leaders”.  Newsroom has an account of MFAT’s appearance at a parliamentary select committee, where much of the discussion seems to have been around the PRC, the “FTA”- upgrade, and so on.  I’m not going to excerpt the story, but read it and all you sense is fearfulness from both sides –  if the Opposition is critical it is that the government might have upset Beijing.  There is no sense of self-respect, no sense of values that matter, just a backdrop of deals and donations –  and that weirdly misplaced view about the significance of the PRC to New Zealand’s economic fortunes so actively fostered by yet another former Foreign Minister, Murray McCully.

And, finally, I must have hit a bit of nerve somewhere near the China Council.  After a post the other day, this tweet appeared on the Executive Director, Stephen Jacobi’s feed.

Which was a bit odd really.  I went back and looked at the post in question.   And I couldn’t find any examples of me calling him names.  I did note that “he appears to be Christian” but as on his Twitter page he calls himself an Anglican, and was tweeting a photo of an Advent service, that didn’t seem an unreasonable deduction.  And as one Christian to another, it can hardly count as name-calling.

So I had a look back at any of my other past posts I could find when I’d written about Jacobi (here, here, here, here and here were the ones I could find).   And yet anything resembling name-calling seemed thin on the ground (which was relief, because it is something I try hard to avoid –  perhaps not always successfully).   In one of those early posts I introduced Jacobi this way

The Council employs a part-time Executive Director, Stephen Jacobi.  He spent considerable time at MFAT, but from his own account his focus was Europe and North America (including as our deputy high commissioner in Canada) and in trade negotiations.  Since leaving MFAT in 2005 he has run his own consulting firm, and been employed as the public face of various trade-related bodies, including serving as Executive Director of the NZ US Council from 2005 to 2014.  He is articulate and readily available to the media, but has no specialist expertise in China or (indeed) on the workings of New Zealand democracy.   That isn’t a criticism –  after all, neither do I –  just to note that his arguments, and evidence, need to be reflected on and carefully examined, perhaps having regard to the interests that are paying him, not as coming from an expert authority in the area.

And that still seems right, and fair.  He is a paid lobbyist and advocate –  propagandist wouldn’t be too strong a word.  Those are, more or less, job descriptions.  I’m sure he believes most or all of what the job requires him to say.  It is just a shame that the institution for which he works seems to have abandoned all sense of good and evil when it comes to the PRC.

But in the search for anything that might resemble name-calling, I did across lots of arguments, analysis, and some evidence. I don’t particularly expect Jacobi or the China Council to engage with me –  although I’d be happy for them to do so – but the thing is that they don’t engage with China experts (notably Anne-Marie Brady) either.  Instead, they play distraction, suggest racism is at work, call debates “unedifying” rather than engage in them, or  –  as in this case –  suggest that all there is is name-calling.  With so many resources at their disposal, that approach doesn’t exactly redound to their credit.  With the politicians on side perhaps it doesn’t matter for now, but such large disconnnects between the values of a people, and the attitudes and practices of their “leaders”, are unlikely to last forever.  It was Scott Morrison who only a few weeks ago observed that we –  citizens of free and democratic countries –  have to be more than just the sum of our deals.  Or, as I added, of our political party donations.

Funding the Reserve Bank: focus on your statutory mandate

The Reserve Bank has been joining the ranks of the public sector agencies bidding for more money –  not just doing so in the conventional manner, behind closed doors in private discussions with relevant ministers, but in public.

There were some initial comments a few weeks ago, which I didn’t notice at the time, using this totally spurious argument

we are a net contributor to Crown revenue rather than a cost, and we’ve asked if we can hang on to a little more of what we make in order to fund extra work,” the Reserve Bank spokesman said.

The Reserve Bank generates a lot of money (mainly) by issuing zero interest bank notes (a statutory monopoly) and investing the proceeds in interest-bearing assets.  It takes little skill to collect this (what is in effect a) tax.     That income should have no bearing, formal or rhetorical, on how much of our resources the Reserve Bank is permitted to spend on other stuff –  mostly more bureaucrats to do regulation, analysis, and (see below) political positioning, of the sort many other cash-constrained bureaucracies in Wellington do.   Those activities do not generate even an iota of revenue for the Crown.

They were back with the begging bowl this week at the annual financial review undertaken by Parliament’s Finance and Expenditure Committee.  I saw two accounts –  one from Newsroom, and one from interest.co.nz.      There were a couple of strange claims, including the Governor appearing to suggest that the CBL failure might have occurred because the Reserve Bank didn’t have enough staff.  I don’t regard that as a totally implausible story  –  then again, the system is not supposed to prevent all failures, and at least some concerns relate to what the Bank did do (suppression orders) rather than what it didn’t do.  But if staffing was a concern, and the Bank thought it didn’t have the resources to do the job Parliament had given it, surely the previous year’s Annual Reports would have said so.  And I’m pretty sure they didn’t.

Orr is also reported as claiming that

….now was the time to resource-up and ready the bank for a crisis.

“The time when under-resourcing most shows up is generally during a time of crisis and we aren’t in one of those times,” Orr said.

I doubt that is so. In a crisis it is all hands to the pump, and institutions pull through.  If there is under-resourcing (and that is an open question) it is more likely to affect progressing work programmes in more-normal times.

Perhaps it is why, 8.5 months into his governorship, we still haven’t had a substantive speech from the Governor on either monetary policy or financial stability/regulation?  But that can’t really be the explanation either –  after all, we’ve always only had one Governor, and his predecessors somehow managed.

The Reserve Bank’s finances are not very tightly managed (externally, by the minister or Parliament).  Under the current Act there is provision for (but not a necessity for) a five-yearly funding agreement, outlining how much the Bank can spend.   It isn’t a great model, for various reasons, even if it was a step forward on the total lack of formal controls that existed prior to the 1989 Act.

But my experience was that almost every year, the Reserve Bank’s actual spending undershot what was provided for in the Funding Agreement.  I knew they had had the odd tighter year this decade, but other than that it isn’t something I follow closely.  But here is interest.co.nz’s account of what the Bank said in its latest Annual Report released in October.

The Reserve Bank’s annual report, issued last month, showed it had undershot spending allowed through its funding agreement by $26.7 million over three years and paid a $430 million annual dividend. By June 30 the Reserve Bank had spent $173.1 million of a possible $199.8 million allowed by its 2015-2020 Funding Agreement, signed with the previous National-led government. Net operating expenses in the June 2018 year were $4.1 million below the funding agreement, despite rising $8 million year-on-year to $76 million.

“The $26.7 million cumulative underspending is expected to partially reverse in the last two years of the funding agreement, as capitalised expenditure on systems improvements is amortised to operating expenses, and the issuance of new banknotes continues. The Bank expects to be within the five-year aggregate expenditure provided for in the funding agreement,” the annual report said.

Bottom line?  They’ve been underspending again, and even though that is “expected to partially reverse” over the next two years, the forecast reversal is only partial and, once again, they expect to underspending the Funding Agreement allowance.  And, under the current statutory model there are no adverse consequences for the Bank if it were to have spent a little more than the Funding Agreement number anyway.  But the issue is moot –  they seem to have managed in a way that will actually underspend (again).

Which leaves another of Orr’s comments ringing a bit hollow

Orr in the select committee again pointed out the limitations of the five-yearly model, saying a “phenomenal” number of “unanticipated” events had happened in the last five years, and the same would be the case in the next five years.

And probably every five years since 1990, and yet the Bank still almost always underspends.

Having said that, this may be one of the areas in which there is some convergence of views between me and the Governor.  The five-year funding agreement model is crazy and should be scrapped.   No corporate – no government agency for that matter –  sets operating expenditure budgets five years in advance, and it is simply silly to expect to do so for the Reserve Bank.  It is fine to do rough medium-term plans to help ensure that foreseeable expenditure pressures are identified well in advance, but that is different from a binding five-year budget.

Where we may well diverge again is that I think the Reserve Bank’s policy, regulatory and related activities should be funded –  as most government agencies are – by means of detailed annual appropriations by Parliament (and will be forthrightly making that case when the current review of the Reserve Bank Act gets round to looking at funding issues).  I wrote about the issue in a post earlier in the year.   Here were some of my points:

A common argument –  at least among central bankers –  is that somehow central banks are different.  There is only one important respect in which they are: they earn far more than they spend.  But even that isn’t very important here.  Central banks make money largely through the statutory monopoly on currency issue, which is just (in effect) another form of taxation.  And spending and revenue are two quite different bits of government finance: IRD might collect lots of money, but it can only spend what Parliament appropriates.

And what of those arguments about avoiding back-door pressure?  Even they don’t mark out central banks.  After all, we don’t want ministers interfering in Police decisions either (a rather more important issue than a central bank), but Police are funded by parliamentary appropriation.  So is the Independent Police Complaints Authority.   There are plenty of regulatory agencies where policy might be set by politicians, but the implementation of that policy is set by an independent Board, and where backdoor pressure could –  in principle be applied.  Other bodies publish awkward reports that make life difficult for politicians.  But those bodies too are typically funded each year by parliamentary appropriation.  It is just how our system of government works.

When I wrote about this issue in 2015 (having only recently emerged from the Bank), I was hesitant about calling for radical change.   The funding agreement system itself could be tightened up in various ways, which might represent an improvement on what we have now.   But there isn’t any very obvious reason not to start with a clean sheet of paper, and build a new system –  aligned with how we manage public spending in the rest of government –  starting from the principle of annual appropriations, with a clear delineation by functions (monetary policy, financial system regulation, physical currency etc), and standard restrictions on the ability of ministers to reallocate funds across votes).

I’m not aware of any country that funds it central bank by annual appropriation.  But historically, central bank spending all round the world was subject to weak parliamentary control.  This is one of those areas where the international models aren’t attractive, and the standard should instead be the way in which we authorise spending across the rest of government.   This is a policy and regulatory agency ….  and should be funded, and held to account, accordingly.

But if the Governor really thinks he doesn’t have enough resources to do aspects of the job Parliament has given, perhaps he could look rather hard at how he prioritises.  In his FEC appearance the other day, he claimed to have been doing so, but in my observation his sense of priorities appears personal, idiosyncratic and even political, not at all well-aligned with the Bank’s statutory mandate.

Recall that the Governor has only been in office for just over eight months, but already we’ve had things like:

  • speeches on climate change, helping out his buddies in the government and in the liberal wing of the business community,
  • the “Reserve Bank as tree god” exercise, which surely didn’t just flow off the end of the Governor’s pen in an idle hour one Saturday afternoon. It will have consumed real resources, at an opportunity cost,
  • cartoon versions of the Monetary Policy Statements and Financial Stability Reviews,  and
  • swamping those individually modest items by several orders of magnitude there was the conduct inquiry of which I noted upon its release

Despite highlighting several times in the report that this was really none of their business (of course they phrased it more bureaucratically: “neither regulator has a direct legislative mandate for regulating the conduct of providers of core banking services”), they’d spent an estimated $2 million of public money to mount their bully pulpit, lecture the banks, lobby for more powers for themselves.  

It simply wasn’t their job, but it suited the Governor’s ambitions to sweep in and spend large amounts of public money –  for modest-sized agencies –  on a personal campaign, to discover what?

The waste goes on.  There is an advert out at the moment for a Manager, Performance and Corporate Relations.  There appears to be some real work associated with the role (some of the bureaucratic hoop-jumping all government agencies have to do) but part of the role is this

Leading a mid-sized team of specialists, the person appointed will provide leadership to organisation-wide initiatives such as the Bank’s Climate Change Strategy and Te Ao Maori framework.

There can be no possible need for whatever a “Te Ao Maori framework” actually turns out to be.   The Reserve Bank isn’t some social agency dealing with troubled individual families, where quite possibly individual cultural backgrounds matter.  It doesn’t really deal with ordinary people much at all –  that is not a criticism, it doesn’t need to.    It runs monetary policy –  which affects and benefits people quite regardless of ethnicity-  and it regulates banks (and other financial institutions) again –  one would hope –  regardless of the ethnicity of individual managers or shareholders.  Fortunately, the “principles of the Treaty of Waitangi” are not part of the Reserve Bank Act.     I don’t suppose the Bank will be spending a vast amount of money in this area, but every little bit reallocated to financial regulation would surely help, at least if you believe the Governor and his Deputy.  It has the feel of the Governor pursuing another personal political agenda at the expense of the taxpayer.

And then there is “the Bank’s Climate Change Strategy”.    I’ve touched on this before, but as a reminder the Reserve Bank is an office-bound organisation, with precisely two offices (main one and a small one –  probably unnecessary –  in Auckland).  For practical reasons (to do with specialist vaults) the Bank –  unlike most central government agencies –  owns a building in central Wellington, and if they own any vehicles at all it might be just one car.  They are a wholesaler of one physical product –  bank notes –  but they import that product from overseas producers, for whom the Reserve Bank is no more than a modest-sized customer (thus with little market power).  But they do, I suppose, travel to lots of overseas meetings (but last I looked, international air travel still isn’t captured in the agreed international carbon reporting framework or our own current government’s incipient net-zero goal).

There is just no obvious reason –  at least not one that isn’t ultra vires –  for the Reserve Bank to be spending public money on a “climate change strategy” at all.  It is a feel-good piece of political positioning, perhaps helping the Governor is his turf fights around the Reserve Bank Act, and assisting him in a cause that he clearly feels strongly about personally –  even if there is little sign of him thinking about it deeply.

I’ve written prevously about the sheer vacuity of much of this, especially in the New Zealand context –  our banking system hardly being heavily exposed to, say, oil producers.  There was a vapid box in the FSR a few weeks ago, and as I noted of it

The text burbles on about possible risks, but it all adds up to very little.     There are numerous risks banks and borrowers face every decade, every century.  Relative prices change, trade protection changes, external markets change, exchange rates change, technology changes, economies cycle, land use law changes.  Oh, and the climate changes.

If one looks at the structure of New Zealand bank (or insurer balance sheets) it just isn’t credible that climate change poses a significant risk to the soundness of the New Zealand financial system (that pesky law again).   Some individuals are likely to face losses from actual and prospective sea-level rises, but banks (and insurers) typically have diversified national portfolios.   People can’t have mortgage debt without insurance, and so the insurers are likely to be constraining people first.   Much the same surely goes for the rural sector?   Sure, adding agriculture into the ETS at the sort of carbon price some zealots have called for would be pretty detrimental to the economics of a dairy debt portfolio, but then freeing up the urban land market probably wouldn’t be great for residential mortgage portfolios, and we don’t see double-page spreads from the Reserve Bank on that issue, or the Governor trying to play himself into some more central role in that area.     It smacks of politics –  signalling the Governor’s green credentials –  more than anything legitimately tied to financial system soundness.

As it happens, the Bank yesterday released its “Climate Change Strategy“, a 10 point statement which seems almost equally devoid of content relevant to the statutory responsibilities of the Bank.  Instead, the Governor is offering political support to the government (that is the gist of the first paragraph) and bidding to be a player.  Here are two of their 10 points.

8.No single institution working alone can achieve meaningful progress on a global challenge such as climate change. Furthermore, it is not for financial policymakers to drive the transition to a low-carbon economy, nor is it the role of the Bank to advocate one policy response over another. That is the role of government.

9. However, appropriate action on a national or global level can only be achieved if individuals and entities are able to take action on a micro level. For this to occur, two conditions need to be met. First, there has to be proactive and effective leadership to drive our collective understanding of climate risks and to establish robust strategies to respond to those risks. Second, there has to be effective and timely dissemination of those assessments and strategies. Appropriate information will be vital in enabling entities and individuals to price and manage risks, facilitating the transition to a low-carbon economy, and ultimately contributing to both the soundness and efficiency of the financial system.

You might agree, disagree, or simply yawn, but when did this become an issue for a central bank, with important, powerful, but quite limited, statutory responsibilities?  And a central bank crying poor, claiming it doesn’t have enough money for its day jobs.   It is more like a creed than something one might reasonably expect from a central bank.

As part of the Bank’s statement we learn that

The Bank has also been welcomed as member of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The Network was set up in December 2017 at the Paris ‘One Planet Summit’ to strengthen the global response required to meet the goals of the Paris agreement.

Head of Department Financial System Policy and Analysis Toby Fiennes says the Reserve Bank is very proud to have been accepted as a member of the NGFS.

“Playing our part globally, and as a leader in the Pacific region, is important both in terms of reinforcing New Zealand’s reputation as a ‘good global citizen’, and in providing us access to the latest thinking around the globe,” Mr Fiennes says.

(Among this small group of (excessively funded?) central banks and regulators is the central banking arm of the Chinese Communist Party. )

I guess it is the sort of feel-good, but empty, rhetoric one now expects from public servants.  And I guess when you see yourself as a tree god, the fit with an organisation devoted to “greening the financial system” must be almost complete?   But it is all empty.  “Playing our part globally” seems likely to involve little more than another round of international meetings to attend –  all those extra emissions – at the taxpayers’ expense, to advance Orr’s personal agenda at a time when he suggests the institution has insufficient money to do the job the taxpayer instructed them to do.  On an issue where there are no material financial system implications at all.

I’m open to the idea that the Bank might in fact need more financial resources, given the various jobs that (wisely or not) Parliament has instructed them to do.   There are other agencies and causes that might have a stronger case  and (on the other hand) some that should simply be wound up altogether.  But the Bank’s case would be that much more compelling if there weren’t repeated signs that the Governor was using the institution and public resources to advance personal, often quite political, agendas that reach beyond his statutory responsibilities.  He should be ensuring –  and the Board insisting –  that resources are rigorously prioritised to focus on the statutory mandate.

Human costs of big dislocations?

Puzzling the other day about the Prime Minister’s extraordinary performance –  tears at her official scheduled press conference, purporting to apologise on behalf of all New Zealanders for a single (awful) crime committed by a single private individual (and could we have imagined such a performance from Margaret Thatcher, Helen Clark, Golda Meir, Indira Gandhi, Angela Merkel or any serious male leader?) I was wondering whether she was about to cry in public about the many other murders that happen each year in New Zealand –  45 to 50 in a typical year.

But when checking out that number, I found a nice time series prepared by the Police reporting the number of New Zealand murders annually since 1926, drawn from a search of their records.   As they note

Note that counting rules for murder statistics have changed over time (i.e. cases vs offences vs victimisations). Therefore, trend for homicide statistics over a long period (especially before 2007) should be interpreted with caution.

In other words if you want to compare the 2016 murder rate with that in 1926 you have been warned: the numbers may not be calculated in quite the same way.  But shorter-term movements should still be meaningful, even allowing for a bit of year-to-year fluctuation.   Fortunately, mass killings (eg Aramona) don’t happen every year.

This was the resulting graph (I hope they are right about zero murders in 1958, but it seems unlikely).

murders

I’ve circled a few surges that caught me by surprise:

  • the first was the apparently significant increase in the murder rate during the Great Depression –  by far the worst economic downturn and social dislocation in New Zealand in the last century,
  • the second was late in World War Two (those years don’t include the Stanley Graham shootings in 1941),
  • and the third was the period of rapid economic change and, latterly, very high unemployment over the late 1980s and early 1990s.

Are these surges just coincidental-  something largely random that masquerades as a pattern?  I don’t know, and I don’t know the literature at all in this area.  There were certainly global forces at work in the rise of violent crime in the 1970s and 80s, and in the subsequent decline, but it does look uncomfortably like a story in which –  at least in New Zealand –  big economic dislocations and high unemployment were associated with higher murder rates. I once wrote a speech for Don Brash –  as Governor –  in which we associated higher suicide rates with such dislocations (and hence why we needed good stable macro policy).  I’ve always been a bit embarrassed about it –  without evidence it probably over-egged the pudding –  but perhaps we were closer to the mark than I’d thought?

In terms of international experience, on a quick look I found this chart

murder us

The US data are easiest to read, and they don’t show the spikes we see in the New Zealand data  (it is a much bigger population, and so perhaps the New Zealand picture is just a small sample problem).    In Canada there is some suggestion of a spike in murder rates during the Great Depression, but not in Australia (where the depression was severe) or England and Wales (where it was not so bad).

I’m convinced good monetary policy has an important role to play in helping to avoid –  and limit – really bad economic dislocations.  High unemployment is quite scarring enough –  costly to individuals and to society as a whole –  but if it was associated with higher murder rates then doubly so.

Anyway, on such weak evidence I”m not trying to make strong arguments.  But I thought it was an interesting, somewhat surprising, chart, and perhaps experts have dug more deeply into these patterns.

Meantime, there many other gross failures of policy –  ones that are the direct responsibility of government –  that we see and hear no emotion from the Prime Minister about.  Prime Ministerial tears should, of course, be reserved to the privacy of the Prime Minister’s own home, but some genuine passion and energy about reversing the house price scandal or the decades of productivity underperformance –  both of which are likely to have cost lives, and certainly represented huge lost opportunities – would be welcome.  Or, rather nearer the justice system –  but this time the even more hands-on direct responsibility of central government –  there was the gross abuse one young New Zealander suffered (and still suffers) from the Crown in this episode, highlighted in this post.

Encouraging transparency and accountability

I’m travelling today and tomorrow, so just something brief now, and perhaps nothing tomorrow.

The government announced a couple of days ago that

From January, all Government ministers will have to release details of their internal and external meetings.

Minister for State Services (Open Government) Chris Hipkins said Cabinet had agreed to the release of summary information from their ministerial diaries from January 2019 onwards, with the first publication in February 2019.

To be specific

For each meeting in scope, the summary would list: date, time (start and finish), brief description, location, who the meeting was with, and the portfolio. The monthly summary will be published on the Beehive website within 15 business days following the end of each month.

It is a significant step forward, and will (or should) strengthen scrutiny and accountability of ministers.  There are some exceptions, and potential scope for the rules to be bent, but it goes beyond the publications practice for ministers in the UK and in New South Wales.   Together with the decision to pro-actively release Cabinet papers, it is another step towards delivering on the commitment to greater openness and transparency in government.

The (largely taxpayer-funded) lobby group Transparency International –  the ones who nonetheless host senior public servants giving secret speeches – has put out a statement welcoming the move.

“We are pleased that the Government acknowledges the need for transparency from its Ministers. Transparency is the antidote for corruption, every action they take makes New Zealand a better home for her citizens and reinforces New Zealand’s leadership in the global fight against corruption,” stated TINZ Chief Executive Officer Julie Haggie.

They suggest this should only be a first step

“We hope it is not long before all Parliamentarians are required to release their diaries and this requirement is codified in law so that it cannot be undone in the future by politicians fearful of transparency,” [chair Suzanne] Snively adds.

Not to disagree with that, but in many respects we have less to fear –  in our sort of political system –  from backbench members of Parliament than from senior officials (and even judges) exercising in some cases huge amounts of discretionary power.  Sometimes that is the ability to regulate directly, but even if they don’t have that particular power then the enforcement (or otherwise) of laws and rules made elsewhere opens up the potential for inappropriate influence, or even corruption.

The specific case I’m most interested in is the Governor of the Reserve Bank.  He will shortly lose his exclusive power to set and adjust the OCR himself, although he will still be hugely influential in monetary policy (and people will be keen to bend his ear or get the inside word).  But even once the new legislation is passed the Governor will retain his, largely untrammelled, powers as individual decisionmaker in regulating banks, and in enforcing (or not) a wide range of regulatory provisions affecting banks, non-banks, and insurers.  There is a great deal of money at stake in many of these decisions.

I’m not suggesting that anything very untoward goes on –  although successive Governors have each been involved in some questionable episodes.  But we (a) need to keep it that way, and (b) gain confidence in the way an institution is being run partly by means of transparency.   And what is good enough for elected Ministers of the Crown (who face scrutiny in Parliament every day) is surely a standard that should also be met by powerful unelected, largely unaccountable, officials.   I’d encourage the Governor to take the lead and announce that he will adopt the same standard, and if he doesn’t do so the Board and the Minister should prevail on him to reconsider.  If such transparency is good enough for ministers, it should be a standard expectation for the top tier of public officials.

Hope springs eternal, but I’m not very optimistic that the Governor will see such transparency as a positive virtue.  Readers will recall that the Ombudsman recently ruled in the Governor’s favour, allowing the Bank to withhold internal analysis and advice prepared for a Monetary Policy Statement at which the then (acting) Governor announced what the Bank was assuming about the impact of some major policy initiatives of the new government (including the now mired in controversy Kiwibuild), with no supporting detail or analysis.   Among the Ombudsman’s justifications was that, although his decision wasn’t made until almost a year after the request, his decision had to relate to the date on which my request had been made (ie very shortly after the relevant MPS).  To test this standard, I then re-lodged the request, so that a new decisions would have to be made about this analysis and information but on the basis that it is now a year old.

Absolutely not to my surprise, the Bank again rejected the request.  They do this even though, across the road, very similar sorts of background notes and briefing papers prepared for the Minister of Finance by Treasury staff as part of the Budget process are routinely, and pro-actively, released.

The Bank does condescend to observe that

In considering how long it is reasonable to withhold information of this nature, the Reserve Bank recognises that as time passes then release is less likely to have an inhibiting effect.

but concludes that a lag of more like five to ten years might be appropriate.  It would be laughable if it weren’t so serious.  According to the Bank, citizens are not entitled to see background papers on such matters ( and in the end the Bank’s analysis of Kiwibuild probably didn’t change the OCR decision materially) even a year after they were written (using taxpayer resources).  It makes a mockery of the principles of the Official Information Act, further undermining the already limited accountability of an already over-mighty public official.

Ministers have set an encouraging lead. The Treasury sets a good example around papers feeding into the Budget process. It is surely time for the Governor –  encouraged by the Board, soon to be more directly answerable to the Minister through a directly-appointed chair – to get with 21st century standards of transparency and accountability.