Our taxes – explicit or otherwise – pay for the whims and initiatives of politicians and public servants. One might like to think that these people would spend our money at least as abstemiously as they would spend their own – rather more so, one might hope, since they know they’ve taken it from us coercively. For those given to personal extravagance we might hope they’d be particularly conscious of the need to avoid taking the same approach with other people’s money.
But the incentives are all wrong aren’t they? It is not their own money, so why would they be anywhere near as careful with it as they would with their own?
At least politicians are in the public spotlight (even if the OIA still doesn’t apply to MPs), visible in their local communities. Ministers face possible questions in the House each week, and all politicians face the threat of loss of office, perhaps loss of job altogether. Elections do something to sharpen the focus of accountability.
And Cabinet ministers are accountable for government departments, themselves funded by annual parliamentary appropriation, a cornerstone of the protections for citizens built into our system.
There are no such protections when it comes to the Reserve Bank. All spending (and other management) decisions are made by one unelected official, not even directly appointed by a minister. The Governor is, notionally, overseen by the Bank’s Board, but historically they’ve seen their primary role as championing the Governor, not protecting the interests of citizens. And there are no annual appropriations. By law, the Bank can spend whenever it likes – and, after all, it “prints” the stuff (electronic and physical). The law provides for a (voluntary) five-year funding agreement, and if such an agreement is signed it is subject to ratification in Parliament. But the Bank discloses the same level of detail about its plan for spending over the following five years as, say, the SIS does. And, unlike the SIS, not even that one line number is binding. It is, of course, all but impossible to get rid of the Governor. In other words, little or no effective accountability around their stewardship of our money.
In recent decades, the Bank has tended to be a relatively abstemious place, partly reflecting the influence and example of Don Brash. Arguably, in some areas, it even overshot a little. But the culture of excess seems to be creeping back in: not so much gold-plating working conditions or salaries, but other sorts of waste. Take this advertisement from the Dominion-Post this morning.
Perhaps there are dozens, even hundreds, of such positions around the myriad of public sector agencies. In some cases, it probably even makes sense for such positions to exist.
But this is the Reserve Bank. It does three main jobs, none of which ever involve dealing directly with the general public; Maori, European, Chinese, Mexican or whatever:
- the Bank issues bank notes and coins. That involves purchasing them from overseas producers, and selling them to (repurchasing them from) the head offices of retail banks;
- it sets monetary policy. There is one policy interest rate, one New Zealand dollar, affecting economic activiity (in the short-term) and prices without distinction by race or culture. Making monetary policy happen, at a technical level, involves setting an interest rate on accounts banks hold with the Reserve Bank, and a rate at which the Reserve Bank will lend (secured) to much the same group. The target – the inflation target, conditioned on employment (a single target for all New Zealand) – is set for them by the Minister of Finance.
- and it regulates/supervises banks, non-bank deposit-takers, and insurance companies, under various bits of legislation that don’t differentiate by race or culture.
Sure, there is a handful of other functions. They can intervene in the foreign exchange market (one dollar for all), and they operate a wholesale payments system (NZClear), but it doesn’t alter the picture. There is just no specific or distinctive European, Maori, Pacific, Chinese, Indian or whatever dimension to what the Bank does (or what Parliament charged it with doing).
But the new Governor – 49 weeks in and still no substantive speeches about things he is actually responsive for – is clearly enamoured of things Maori. A fine thing no doubt for him personally. But here he is running a major public agency, using public money.
So what is he up to with his “Te Ao Maori strategy..designed to build a bankwide understanding of the Maori economy”? Given his statutory responsibilities – and those in charge of public agencies are supposed to operate constrained by statute – what makes the so-called “Maori economy” any different than the “European New Zealander economy”, the “Asian economy”, the “British immigrant economy”, the “Pacific economy” and so on, for Reserve Bank purposes and policy?
The Bank’s claim is that this new understanding will “enable improved decision making…about monetary policy and financial soundness and efficiency”. Yeah right.
Monetary policy operates in much the same way whatever the colour of skin, or culture, of the agent. Bank notes are as useful to us all. And financial sector regulation isn’t going to be – or shouldn’t be – any different. Perhaps we’ll have a Presbyterian cultural competency adviser next, or a Catholic culture one?
It all has the feel of personal virtue-signalling at your expense and mine; the Governor pursuing his political or other personal aspirations, rather than being a position a high-performing Reserve Bank actually needs.
Anyway, you can read the rest of the advert for yourself, including noting that this isn’t just one position. This “cultural capability advisor” is to work with the “Project Manager (Te Ao Maori strategy)” already in place.
Arguably, this specific position is less ridiculous than the whole “Reserve Bank as tree god” nonsense the Governor continues to expound, complete with the island vision, that just happened to be represented in his glossy pamphlet by the rather expensive foreign resort of Bora Bora.
But if it is less ridiculous, it is even more wasteful – annual salaries for experienced “cultural facilitators” won’t come cheap. The present value cost of this initiative is at least $1 million (I’ve lodged an OIA request for the relevant background papers and costings).
Just a week or two ago, the Deputy Governor claimed that the Bank needed more resources to do properly its financial regulation role (I even expressed some mild sympathy for that position). Not on the evidence of this advert, which suggests a very curious sense of priorities.
But if they do have that sort of money floating around, it might be considerably more productive – and more attuned to their statutory responsibilities – to, for example, conduct and publish some serious research and analysis around their aggressive bid to require banks to have much more capital funding, or to respond to some of the critiques that Ian Harrison posed in his paper earlier this week. Serious money is at stake in what they propose – billions of dollars. But that isn’t the Governor’s money, or the Bank’s. It was – or would have been – your money and mine. Only the Bank proposes to, on its own numbers, obliterate – billions of dollars of future income we’ll just never have, in pursuit of an exaggerated uncertain saving decades hence, not grounded in serious analysis.
But no doubt the Governor will be welcome at all those “powhiri, whakatau, wananga, hui and other engagements”.
It is nonsensical virtue-signalling, without substance. And at your expense, not the Governor’s.