Political donations, National, and Jami-Lee Ross

Jami-Lee Ross, MP for Botany, appears to be a somewhat odious character.  Between his repeated betrayals of his wife, on the one hand, and his apparently quite-central role in National Party’s large-scale fundraising from PRC-affiliated sources (New Zealand citizens and not), there seems to be little that is at all appealing.  And yet……for whatever reason (and since I’ve never heard an apology to the New Zealand public for his part in the process it is hard to believe it is totally public-spirited) he has been drip-feeding material to the media about the details of several such donations.    The first involved non-English-speaking Auckland businessman and close affiliate of various CCP/PRC groups, Yikun Zhang.  And this week we’ve had some details of the (previously disclosed) large donation from a New Zealand registered company owned and totally controlled by a PRC billionaire.  And, amid these disclosures, he is now calling for law changes, to prevent some of the practices he was formerly so adept at, and apparently untroubled by.   We should be thankful for small mercies, although it would be better if he –  and all those involved –  departed the political scene, and the swamp was drained.

On Twitter yesterday afternoon, Anne-Marie Brady drew her followers’ attention to the fact that Jami-Lee Ross was speaking on this issue in Parliament’s general debate –  presumably one of his rare speaking opportunities, and no doubt the Herald story was timed with this slot in mind.

Two things were striking about this event. The first is that no other MP speaking after Ross even mentioned these issues. Sure, each MP has his or her own barrow to push, but it goes to the apparently general desire among our political parties to avoid confronting what has been, and no doubt is still, going on.

And the second – prompt for this post – was realising that despite the coverage given to the Todd McClay story on Monday, there seemed to be no media coverage at all, anywhere, to Ross’s speech. Perhaps I missed something, but I searched myself, and I checked the Politics Daily email listing compiled by Bryce Edwards, and couldn’t see a single mention. Sure, probably no one has much time for Ross personally, but the issues he is raising aren’t imaginary.

And so, since Hansard is in the public domain, here is Jami-Lee Ross’s speech.

JAMI-LEE ROSS (MP—Botany): A regulation we do need in this country is greater restrictions around foreign donations to political parties. Yesterday, we saw in the New Zealand Herald a very good example of how the current rules around donations do not work for our democracy. I don’t need to go into depth around that particular donation, but what it does highlight is how our current laws around donations are wrong. It’s true—I was one of the sources for that story. It’s true—I was able to outline for the journalists my phone records and email records and contacts around that particular donation, because at the time I was asked by someone who held ministerial office to collect the donation. I did so because I wasn’t “OIA-able”; the person that asked me to do so was subject to the Official Information Act (OIA).

The issue that that donation highlights is that our current laws do not adequately restrict the ability for foreigners to make donations to political parties. It is true that that donation in the Herald yesterday was lawful. It is true no laws were broken, but we’re in the business of making laws and fixing laws where they are wrong. It is wrong, in my view, for a foreigner who has interests in New Zealand, who wants to donate to a political party, to be able to utilise a New Zealand-based company. It is wrong for an individual who has no other links to New Zealand other than business through a company to be able to make a donation, and have influence by making that donation to a political party.

Our laws are wrong. In my view, if you are unable to influence an election by voting, you should be unable to influence an election or our democracy by making a donation. It’s a fairly simple concept, and it’s one that we should be looking at in this House. Correct, the donation was not unlawful; our law is wrong and needs to be changed.

When we talk about foreign interference, it’s very easy to look at donations, and look at the way in which we interact with people that have connections to foreign States, and just dismiss what might be going on. But when we look at it very clearly and carefully, when we try and understand the connections and the influences that people from offshore are trying to have on our democracy, it can be very chilling. Does anyone really believe that a Mongolian oligarch wants to, out of the goodness of his heart, make six-figure donations to a political party after meeting the person who has responsibility for the very policy that he’s interested in, when it comes to the exporting of livestock? I don’t think he did so out of the goodness of his heart. I don’t think any laws were broken, but I think we need to fix the system. We need to ensure our democracy is safe from foreign influences, and ensure that we tighten up the rules.

I’ve heard that there is a lot of support in the House for banning foreign donations. That’s great, but simply lowering the threshold from $1,500 down to zero will do nothing, because any foreigner, at any point in time that they wish, can set up a New Zealand company or use an existing one to make a large donation. We have politicians in this House, and those seeking election, that have a lot of connections to people that have offshore influences and offshore interests. We should ensure our democracy and our electoral laws are much tighter.

There is a foreign interference inquiry under way, through the Justice Committee. Unfortunately, that inquiry is going very slow. Unfortunately, the committee that is looking at that inquiry may report back too late for us to make changes to our electoral law. It’s important we move now and we move swiftly because election year is very close. That same committee is also looking at the Electoral Amendment Bill right now. Unfortunately, that Electoral Amendment Bill is too tight and does not allow the committee to consider foreign donations or consider donation laws at all. The very same people sitting on the inquiry are also considering that bill. It’s my view that the House should give that committee the power to look at donations; give those same people doing the inquiry around foreign interference and around elections the power to make recommendations around amendments to the Electoral Act, with regards to donations. We need to move on this. Election year is not far away. There is a very good example out there, and there will be many others, that foreigners—and we heard directly from the spy agencies yesterday at the select committee, in both an open session and then in much more detail in a secret session—about—

SPEAKER: Order!

JAMI-LEE ROSS: —influences in our democracy, and we need to take them seriously.

I’m going to seek leave in a second to have a Supplementary Order Paper (SOP) in my name—SOP 324—which does seek to make some changes referred to the Justice Committee.

I seek leave for Supplementary Order Paper 324 in my name to be referred to the Justice Committee, and for the committee to, in its consideration of the Electoral Amendment Bill, have the power to consider, and if it thinks fit, adopt the amendment set out on SOP 324 or any other amendments relating to electoral donations.

SPEAKER: Is there any objection to that process? There is objection.

I thought the central line was this one

In my view, if you are unable to influence an election by voting, you should be unable to influence an election or our democracy by making a donation. It’s a fairly simple concept, and it’s one that we should be looking at in this House. Correct, the donation was not unlawful; our law is wrong and needs to be changed.

It isn’t clear how anyone could reasonably take a different view but –  based on their comments this week –  Simon Bridges (now heading off to Beijing) and Todd McClay do.

But the other key aspect was the Supplementary Order Paper Ross intends to introduce at the Committee stage of the Electoral Amendment Bill currently before the House.  The link is here.   As I understand it, the proposed amendments would prohibit anonymous donations and would allow donations only from registered electors in New Zealand (thus prohibiting donations to political parties from companies, unions, or any individual not eligible to vote in New Zealand).   All of those sorts of changes make a great deal of sense to me.  I hope Ross is able either to bring these amendments to a vote –  which would force individual MPs to make an on-the-record choice about what influences they regard as acceptable –  or perhaps up the pressure on the government – which has done precisely nothing about these issues, and was never keen on an open inquiry by the Justice Committee on foreign interference (government departments would tell the Committee all they needed  to know, or so the PM’s office told us) –  to propose serious reforms of its own.   As you’ll see in the record from Hansard there was objection –  apparently from National –  which blocked Ross’s SOP being referred to the Justice Committee.

Perhaps I shouldn’t be surprised, by I still am anyway, that none of this seems to have been covered by our media.   But I imagine that the PRC embassy will have taken note, and the welcome accorded to Bridges and Brownlee in Beijing will be a little warmer for knowing they are not willing to be pro-active and initiate or champion steps to fix these gaping holes in our electoral law.

And we are left wondering whether Todd McClay’s defence of the PRC’s conduct of Xinjiang was because of the large donations from regime-affiliated sources (including the Inner Mongolian one he was directly involved with) or because he genuinely believed it.  It isn’t clear which option would be worse.   Either way, the whole business reflects very poorly on McClay, his leaders, and his party.   (And not much better on Ross.)

Immigration and NZ economic performance

Geoff Simmons, the economist who is leader of The Opportunities Party (TOP), invited me to come along to their monthly Wellington event to talk about my views on New Zealand’s immigration and the likely connections between high target rates of non-citizen immigration, extreme remoteness, and New Zealand’s long-running productivity underperformance.    Geoff has run a series of these conversations –  including one fairly recently with Arthur Grimes on the “wellbeing Budget”, and another on aspects of the tax system with Andrew Coleman.   They seem to be the party of policy wonks  (TOP’s own immigration policy –  much of which I’m fairly sympathetic to – is here).

Monday evening’s conversation with Geoff, and the follow-up Q&A session, was recorded and is now available (the title is their own –  I rather winced when I saw it this morning)

I haven’t listened to it again so am not sure how the story comes across in this format.  Like, I’m sure, almost every speaker ever I came away conscious of lines that could have been run better, or useful analogies that I forgot to include.  But for anyone interested, there it is.

I’ve done various presentations, articles, and so on on elements of my story, tailored for different audiences.  Some of those from recent years are

speeches

Links to all those are available here.

For the gist of the story, here are the last couple of paragraphs of one of those speeches.

40 years ago, Sir Robert Muldoon, Bill Birch and the rest of that government launched the series of incredibly costly energy projects known as Think Big.  It was, with the best will in the world, an utter disaster.  But it came to end after only a few years.   By contrast, our immigration programme, which has now run this way for almost 30 years is really much more deserving of the label Think Big: it is bigger, has skewed the economy more, has lasted longer, and has done much more to damage the prospects of New Zealanders living here.  There has been a central planners’ conceit that we can simply ignore what NZers are doing –  leaving, typically in large numbers –  and bring in lots of (modestly skilled) foreigners, and concentrate them in Auckland.  Do so, so the implicit story goes, and new highly rewarding industries and opportunities will arise –  the wonders of what economists call agglomeration.   It has proved to be an incredibly flawed strategy.  In successful big cities abroad, GDP per capita far exceeds that in the rest of the respective countries, and the gaps are growing.  Think London, or Paris or Shanghai, or San Francisco or Amsterdam.  But just don’t think Auckland.  Despite really rapid population growth over decades, Auckland’s GDP per capita exceeds the New Zealand average by only a modest margin.  And worse, for the 15 years for which we have data, that gap has been shrinking, not widening.    British exports are London-based, but it is hard to think of a material export industry that is based in Auckland (or Wellington).

We need to start taking more seriously the terrible disadvantages our distant location imposes.  That means it is time to give up the big (population) ambitions that have guided –  probably subconsciously –  most political leaders since at least Julius Vogel, and instead make the most of the strengths we already have: smart and energetic people and strong institutions.  Perhaps one day we’ll have exceptional productivity growth, and so many opportunities here that we simply can’t make the most of with the people we have.  For decades, it hasn’t been that way.  It isn’t now.  So we should stop the mythmaking, and revert to being a normal country –  one that makes its own prosperity, with its own people –  rather than endlessly hankering (as our officials and ministers constantly seem to) after some better class of people over the water who, if only we could get them, in enough numbers, might finally reverse our century of decline.  It simply won’t happen.  We need to change course.

National on the economy

On Monday the National Party released their “The Economy” discussion document, the latest in a series of such documents they’ve published in recent months as they move towards setting policy for next year’s election.    The documents actively invite feedback, and if one should be sceptical of crowd-sourcing policy programmes mostly it seems like a worthwhile initiative.

A few weeks ago I was quite critical after Simon Bridges’s conference speech about the apparent lack of recognition of the structural failings of the New Zealand economy, let alone of any hint of a serious strategy that might reverse the decades of underperformance.

But, for all the almost ritualised mentions in Simon Bridges’s speech of the importance of a strong economy (even the Prime Minister mouths those sorts of line from time to time), there was nothing –  not a word –  to suggest that he recognises that the biggest obstacle to higher material living standards (whether in the form of cancer care or other public or private goods and services) is the woeful productivity record that successive governments –  led only by National and Labour –  have presided over.    There is plenty of talk about cyclical issues, but nothing about the structural failures, and nothing about what National might do that would conceivably make a real difference in reversing that performance.

Sure, it wasn’t primarily a speech about economics, but there has been nothing from Bridges or his colleagues elsewhere, and no hint of a recognition here, that much-improved productivity performance is the only sustainable path to much better material living standards.  And not a hint of a recognition that these failures were already well apparent in the government in which he served (latterly as Minister of Economic Development)

I went on to note that National appeared to be glossing over the fairly woeful overseas trade performance: exports and imports have been shrinking as a share of GDP.

I’m much less critical of the discussion document.   This line appeared on the first page, the leader’s own statement

New Zealanders’ productivity and income levels have fallen behind countries we once had similar income levels to, like Australia, the United States and leading European economies.

And from Paul Goldsmith’s opening

Improving productivity remains New Zealand’s most important economic challenge and the ideas discussed in this paper provide ways to meet that challenge, with the goal of raising incomes for all New Zealanders.

National understands that significantly lifting productivity is the only way to materially improve New Zealanders’ living standards. Increasing productivity means we can produce and sell more of what the world wants, at better prices, using fewer resources.

Good stuff.  And he goes on

New Zealanders’ living standards will not improve by simply redistributing what we
already have. Instead, we need to be absolutely focused on lifting New Zealand’s relatively weak productivity levels.

and

New Zealand’s core economic challenge is to lift our relatively weak productivity. To do that, our economy needs to become more internationally competitive. The world does not owe us a living. We are a small, isolated country far from global markets, which creates both opportunities and challenges.

and

The only way to materially improve the living standards of New Zealanders over time is to become more productive. Higher productivity means more in the back pockets of New Zealand families. New Zealand’s productivity is a more productive and competitive economy that lifts household incomes approximately 30 per cent below the top half of the OECD and 25 per cent below Australia.  New Zealanders also work more hours a year than any countries in the top half of the OECD. In 2017, for example, workers in Denmark, Germany, the Netherlands and Norway worked 300 hours less than New Zealanders.

Since the late 1990s, New Zealand’s productivity growth rates have been similar to that of the top half of the OECD. We need to be doing better to catch up and close the gap. That’s hard. It requires a relentless focus on productivity growth.

National is ambitious for New Zealanders and believes we should target higher rates of productivity in order to close the income gap with countries like Australia, the United States, Canada and leading European economies.

There was even talk of adopting a productivity growth target.

On foreign trade, we read this

New Zealand is a small country with a domestic market of only about five million people – so we depend on trade for generating greater prosperity. Trade supports over 600,000 jobs across our country, and is responsible for a higher standard of living and better quality of life for New Zealanders.

However, New Zealand has a relatively low exports-to-GDP ratio compared with other small, advanced economies. Lifting our exports will take further improvement but create new jobs and raise incomes.

So the rhetoric and some of the framing isn’t bad at all.    They could have made the same points even more brutally:

  • relative to the top tier of OECD countries (US, and leading half-dozen north European economies), productivity (real GDP per hour worked) has kept on slipping (in the last 25 years, productivity here has fallen from around 65 per cent to 60 per cent of those in the top-tier OECD countries while in, for example, Poland it has risen from around 30 per cent to around 55 per cent),
  • New Zealand has managed hardly any productivity growth at all over the last five years, and
  • not only are foreign trade shares (exports and imports) low for a country our size, but they’ve been shrinking.

But even if Simon Bridges in his introduction did note of the previous government “we didn’t everything right”, to have done so might have prompted too many hard questions about National’s own record.

What of the policy proposals and ideas?

I found a reasonable amount to like:

  • they haven’t fixed on a public debt target yet, but I liked the articulation of the flow fiscal goal (“Governments should aim for balanced budgets over time, so that surpluses in the good times offset the bad times”).  With little evidence of an overheating economy at present, that should have them arguing for a balanced budget now, not for surpluses,
  • I was pleasantly surprised that they remain committed to lifting the NZS eligibility age, and to introducing a somewhat more demanding residence requirement.    They should have gone further on both fronts (my thoughts on NZS here) –  said from the perspective of a household where my wife is 10 years younger than I am and still won’t be affected by National’s proposed change.  But we should be thankful for small mercies: on this issue, National has moved decisively on from the Key irresponsibility.
  • I like the idea they are toying with of adjusting for inflation the interest earnings and interest payments that are tax assessable/deductible.   Various people, including at times the Reserve Bank, have argued for this for years.  It is just and right to do so, but……there isn’t that much in the issue.
  • I like the mention of possibly using congestion pricing on some parts of the roading system.
  • I am encouraged that they are willing to think seriously about the possibility of lowering the company tax rate (although disquieted by talk of favouring small businesses through the tax system).  That said, given our imputation system, a lower company tax rate benefits foreign investors (we would generally benefit from more of such investment), and if they are serious about addressing this issue –  and productivity growth –  substantively then they need to think about options for lowering the taxation of capital income earned by New Zealanders as well.  Whether they have the political skills to manage the narrative around that sort of proposal is, at very least, an open question.
  • The talk –  not specific in this document –  of a proper overhaul of the RMA and serious liberalisation of the urban land market is encouraging.  The ability of the next generation to afford decent houses (and gardens etc –  the sort of place most New Zealanders seem to want) depends on it.
  • And I like the idea of a much tougher approach to new regulation, and some sort of commitment to reducing the overall volume of economic regulation.  On that count, I like the (adopted first in parts of Canada) idea of eliminating two old regulations for each new regulation (ie a shrinking cap on the volume of regulation itself).   There are risks around such an approach once it in turn becomes bureaucratised –  ministers and bureaucrats will game the system skilfully, so it would need serious leadership from the top, and sustained follow-through –  but for now the value is in the signal it sends.

And there is other stuff I like, often undoing bad calls by the current government (eg the ban on new oil and gas exploration and the planned labour reforms  – I found this note valuable on the latter).  There was even talk of possibly unilaterally lifting all remaining New Zealand tariffs, recognising that tariffs tax New Zealanders.

They were even surprisingly muted on immigration.  I thought this line from early in the document was quite cleverly drafted, with the focus on creating a climate in which New Zealanders no longer want to leave permanently.

New Zealand is also competing with the rest of the world for skills. If we aren’t internationally competitive our best and brightest leave for overseas and our living standards worsen relative to the rest of the world.

And if I disagree, quite firmly, with their paragraph on immigration itself  – after all, we have one of the highest levels of workforce skills among natives of any OECD country

Immigration can help to deliver a more skilled and willing workforce. National understands the benefits of sound immigration policy from an economic, social and cultural perspective. The skilled migrant levels should match industry needs and the administration of visas needs to be prompt and predictable. New Zealanders must be at the front of the queue for the jobs created by our growing and changing economy, but immigration will remain an important complement to that growth.

at least the “critical economic enabler” gung-ho rhetoric is gone, and this paragraph is a long way down the document.

Of course, there is other stuff I didn’t like.    Their section on regional development is about as devoid of a serious framework –  real exchange rate anyone? –  as anything from Shane Jones.  They still seem enamoured of big taxpayer subsidies to “glamour” industries (screen grants), and when they talk of privatisation it is never about efficiency or competition or accountability or things like that, but rather silly arguments about freeing up cash to spend on other things (when, as they know, the Budget is in surplus and the debt is low).   And they seem tantalised by the idea of more infrastructure spending without offering much assurance that the sort of schemes they might proceed with would be any better –  in economic return terms – than those of the previous National government.   Perhaps I’ve mentioned that there was next to no productivity growth economywide over the last five years or so?

But when I got to the end of the document, I guess my overriding reaction was a bit similar to my reflections on the reports of the 2025 Taskforce (the body set up by the previous National government to provide analysis and recommendations on closing the income and productivity growth gaps to Australia  –  by 2025, a date that mocks us now).  I had quite a lot of involvement in that process, and largely wrote the first report.  I also largely agreed with most of the recommendations the Taskforce themselves made –  very few of which were ever adopted.   And yet, as I reflected on the report in the months after it was released, I became increasingly convinced that, sensible as many/most of the recommendations were, they weren’t enough to make a decisive break in New Zealand’s economic and productivity performance.  Some important things were missing (although at the time I wasn’t really clear, even in my own mind, what they were).

Quite a few of things National is proposing look sensible. The general direction looks sensible.   The rhetoric is better than it was –  although, by itself, such rhetoric is cheap, and is the sort of thing most Oppositions for 25 years have eventually come round to saying.  But the scale of the policy response they are talking about is simply incommensurate to the scale of the problem (much of the policy mix they are suggesting is carrying on a broad approach they adopted in government, and productivity growth was very disappointing then).  For New Zealand average labour productivity to match that in top-tier OECD countries would require a 60 per cent lift from where we are.    That is simply huge.  Huge problems are rarely successfully answered with small changes (even a succession of them).

And so my challenge to National is along the lines of that the rhetoric is great, and I hope it reflects a shared sense that New Zealand’s long-term economic performance really is deeply disappointing, and has not sustainably improved –  relative to other advanced countries –  for any prolonged period for many decades now.  As they say, that has real implications for us, our children and our grandchildren, for the material living standards –  and public and private services –  we can achieve for the population as a whole.

But if you are serious, and you really mean what you say – all those good quotes I posted earlier –  you need to keep thinking harder, digging deeply, consulting broadly and testing and evaluating the proposals and analysis put to you.   Great ambitions need to be matched by excellent analysis, courageous policy, and skilful management of the political challenges.   Perhaps for many in the National caucus, winning the next election is all that matter, but I’d urge the party, and its members, not to focus on the small ambitions, but on the really big challenge that, successfully confronted, would so much transform New Zealand for the better, for almost all New Zealanders.

Monetary policy speeches and conferences

This week marks 17 months since Adrian Orr took office as Governor of the Reserve Bank.  In that time, there has been not one consequential on-the-record speech from the Governor on the areas of his core responsibility: monetary policy and financial regulation/stability.  It is a quite extraordinary record.  It is probably not matched by any of his predecessors for decades, if ever –  and for the most of the period prior to 1989 Governors had little formal power, and thus perhaps there were fewer expectations about scrutiny/accountability etc.  It is all the more puzzling in an individual who doesn’t seem shy of the limelight on other matters and who, if the substance is often lacking, is never short of a good turn of phrase.

The Governor currently wields great power personally, and alone, on bank regulation.  The bank capital review is proceeding, and yet we’ve had not a single speech from the Governor about this most consequential judgement that he alone will take –  nothing, for example, on his framework for thinking about the issues and risks, nothing about key uncertainties, just nothing.

On monetary policy, legal responsibility is now shared around a bit.   There are now three external (part-time) MPC members, and not a word has been heard from any of them. whether in interviews or in speeches.  There have been a couple of sets of remarks by Assistant Governor, Christian Hawkesby, but it looks as if central bankers have to leave New Zealand before they are allowed to give speeches: both sets of panel remarks were to groups of central bankers at overseas conferences.  Of the first of those, I noted

it was disappointing, to say the very least, how much political spin suffused the speech, and how lacking in analytical substance it was. 

The more recent effort was better, but still with little to suggest senior people with a really good grasp of the issues and challenges, or willing to make themselves accountable for their analysis and reasoning.

Oh, and you will recall the Bank’s apparent reluctance to engage openly on any of the issues, or work they are undertaking, around potential issues and options if the OCR reaches the effective lower bound (on current laws and technologies).

And all this while they repeatedly try to tell us how open and transparent they are.

On Friday a press release from the Reserve Bank dropped into my email inbox.    The subject line was, no doubt, designed to impress

RBNZ and IMF join efforts on the future of inflation targeting

The Reserve Bank –  constantly complaining it is short of money –  and the International Monetary Fund are, we were told, this week hosting an international conference (“delegates from around the world”).  There was LOTS of enthusiastic rhetoric.

From the Reserve Bank

While inflation targeting has had a history of success in delivering low, stable inflation and substantial macroeconomic stability over the past several decades, the last 10 years have proven to be challenging for monetary authorities.

RBNZ Assistant Governor and General Manager of Economics, Financial Markets and Banking Christian Hawkesby says: “We are now faced with stubbornly low inflation and low interest rates, driven by structural and cyclical factors. If monetary policy is to be successful for a further 30 years, we need to confront these challenges.

“This is what this conference is about — understanding the big questions about inflation targeting and considering how we need to adapt to continue being as successful as possible.”

And from the IMF

The IMF’s Director of the Office for Asia and the Pacific, Chikahisa Sumi, says that the conference is a timely event.

“New Zealand pioneered inflation targeting three decades ago. Most recently, the RBNZ has again been among the pioneers in the central bank community when revisiting its monetary policy framework.

“Discussions about these frameworks currently happen not only in advanced economies but also in many emerging market countries. This conference is happening in the right place, at the right time, and with the right participants.

“We are delighted to work closely with the Reserve Bank of New Zealand in providing this opportunity for experts from both advanced and emerging economies to share and gain cutting-edge insights about the future of monetary policy making.”

Which all sounds rather impressive, even if one couldn’t help wondering about exercises like this going on behind closed doors –  rather than, say, open speeches – as they debate things safely with those on the approved list.

And yet for all the fine rhetoric, the conference programme –  there was a link attached –  didn’t really seem to match up.   Once again, the Governor isn’t speaking.  Neither are any of the external MPC members.     There are eight quasi-academic papers being presented, only one (on a non monetary policy topic) by a relatively junior Reserve Bank researcher (who is also the only Reserve Bank discussant).   Perhaps more interestingly, despite all that talk about “confronting the big questions about inflation targeting”, not one of the eight academic papers looks as though it is likely to do anything of the sort (judging by the titles).  There are a couple of panel discussions in which the Assistant Governor and the Deputy Governor are participating, but an hour and four panellists suggests something more akin to once-over-lightly  – even if important issues might get briefly mentioned –  than in-depth scrutiny.

Remarkably, as the advanced world is now in a renewed easing phase, and the worrying scenario of going into a new downturn with little or no conventional monetary policy capacity is now an immediate issue, not a single paper at the conference looks to be addressing any of these issues, or whether (for example) differently-specified targets might have avoided the current predicament or might help emerge from it.

In sum, it looks as though they will be spending a lot of taxpayers’ money on a series of very detailed papers, looking at issues of (at best) second-order importance, while trying to spin the conference as something “cutting edge about the future of monetary policy making” when there is little sign of it being anything of the sort.  In that respect, the conference –  despite the hype –  looks like a pallid imitation of one held here five years ago that really did attempt to address at least some of the bigger-picture issues.

I was intrigued by the IMF Director’s comment

This conference is happening in the right place, at the right time, and with the right participants.

Dissidents, critics, and sceptics seem not to the “right participants”, but I have lodged an Official Information Act request with the Reserve Bank to find out who was invited and who has accepted the invitation.

For New Zealand, it is hard not to think that a more open forum, engaged with the specifics of the New Zealand economy, and the issues and options facing policymakers in New Zealand (informed, of course, by overseas experience) would have been a better, and more legitimate, use of public money.    Perhaps even a speech on monetary policy by the Governor.

 

A policy costing unit

The Government’s plans for an independent policy costings unit were back in the news this week, with the announcement that Cabinet had agreed that the proposed new body should enjoy the exalted status of an Officer of Parliament  (a status it would share with the Auditor-General and the Ombudsman –  where the case is clear-cut –  and the Parliamentary Commissioner for the Environment –  where any case seems more grounded in feel-goodism).

Back when I was still a bureaucrat, I favoured the establishment of a small Fiscal Council (along Irish or Swedish lines) and thought (and think) that the mandate of such a body could usefully be widened to monitoring and reviewing macro policy more generally.   But what the government appears now to have in mind is primarily a policy costings unit, as championed for several years by the Green Party.   I’ve written about the idea on several occasions and have become increasingly sceptical.

This post in early 2016 dates from when the Greens first openly called for such a body.  And there have been various others since, including here, here, and here.    There was a Treasury-led consultation process last year (the document is here) which I made a short submission to (submissions are here).

Rereading my submission now, I find my views largely unchanged, with the exception that I am now much more sceptical than I was then of the case for making any new entity an Officer of Parliament –  the more so if, as now seems envisaged, the entity serves primarily as a costings unit for political parties (thus, essentially playing the sort of role economic consulting firms do).  If such a body is to be established, an independent Crown entity model might have been more appropriate, better protecting the relative status of the two absolutely vital Officers of Parliament (Auditor-General and Ombudsman), which act as crucial checks on the Executive.     It would be odd to have a policy costings unit as an Officer of Parliament while the –  much more vital –  Electoral Commission is only an independent Crown entity.

My summary observation was as follows:

I am much more sceptical (opposed) to the case for an institution to cost political party proposals (and in this respect associate myself with many of the comments in the New Zealand Initiative submission).  Parties have adequate incentives already to make the case for their policies, in whatever level of detail the political (voter) market demands, and (as the NZI note) already have access to the Parliamentary Library resources, parliamentary questions, and Official Information Act requests.  A policy costing office –  not found in any small OECD country –  would be, in effect, just a backdoor route to more state funding of parties (and not necessarily an efficient route – bulk funding would be preferable if state funded was to be more extensively adopted).  It also reflects a “inside the Beltway” conceit that specific costings are highly important, and that use of a single “model” or set of analysts somehow puts everyone on equal footing  (it doesn’t –  public service analysts having their own embedded assumptions about what is important, what behaviours are sensitive to what levers etc.)   With the possible exception of the Netherlands, I’m not aware of any country where a political costings office products plays any material or sustained role in election campaigns and outcomes.

There is an important distinction here.  Private entities (parties and their supporters) have every incentive to invest in convincing voters of their case/ideology/competence/costings. By contrast, no one has a strong private incentive to do the sort of analysis and commentary –  often longer-term in nature –  that a traditional (narrow) Fiscal Council does.  That is why a reasonable case can be made for a public institution of this sort (preferably macro policy focused –  since the same absence of incentives applies to monetary and financial regulatory policy).

There has been plenty of talk this week of how 29 of 36 OECD countries have some sort of independent fiscal institution.  This was the chart from the consultation document.

fisc council chart

But only a small number of those do policy costings, and none of the countries where the independent fiscal body does policy costings are themselves small.   I’ve not seen Treasury or the government engage with that point –  resources are more scarce in small countries, especially perhaps in relative poorer ones.   And although the US Congressional Budget Office is widely cited in such debates (and is pretty well-regarded) it doesn’t do policy costings for political parties or candidates as part of the election process, but rather produces independent expert analysis on proposals actually before Congress (the sort of role our less-politicised public service is supposed to play).   A policy costings unit for political parties, for use heading into an election, and paid for by taxpayers, remains quite unusual in OECD countries.

I’ve listed most of my objections previously, but just quickly:

  • there isn’t an obvious gap in the market.   At present, political parties produce costings (sometimes reviewed by independent experts) to the extent they judge it to be in their own interests to do so.  Voters, in turn, can judge whether the presence or absence of any costings, or any debate around them, matters much.  Existing parliamentary parties have access to considerable taxpayer resources which they can draw on to develop and test policy proposals,
  • it isn’t obvious when, if ever, a New Zealand election in at least the last fifty years has turned on the presence, absence, quality (or otherwise) of election costings.  It is a technocratic conceit to suppose otherwise: people vote for parties for all sorts of reasons (values, mood affiliation, fear/hope, being sick of the incumbent, trust (or otherwise)) which have little or nothing to do with specific policy costings,
  • the relevance of specific policy costings (and indeed overall fiscal plans) is even less under MMP than it was in years gone by.  Party promises are now little more than opening bids, as coalitions of support are put together after the election to govern (and on almost every specific piece of legislation).  We simply aren’t in a world where a few dominant ministers dominate a Cabinet which in turn has a majority (or near so) in the government caucus, which in turn has an unchallenged majority in Parliament,
  • the “fiscal hole” argument (from the 2017 campaign) remains an utter straw man in this context.   First, when Steven Joyce made his claims in 2017 lots of people, including experienced ex-Treasury officials, weighed in voluntarily, and debate ensued about whether, and in what sense, Joyce was saying something important.  The system –  open scrutiny and debate –  worked.  And, secondly, a policy costings unit –  of the sort the government apparently envisages – would not have made any useful contribution to such a debate, which was about the overall implications of Labour’s fiscal plans, not about the costs of specific proposals Labour was putting forward.     Elections are messy things –  always were and probably always will be, and that isn’t even necessarily a bad thing.
  • some of the arguments made for a policy costings unit might have more traction if, somehow, every political party and candidate could be forced to use it (say, submit all campaign promises to the costings unit at least three months prior to an election, with the costings unit issuing a report on all of them say at least one month prior to an election).  But even if you thought that might be a good model, it isn’t going to happen (and there is no credible way that such a model could be enforced).  Instead, the proposed costings unit will be used when it suits parties, and not when it doesn’t, and will probably be most heavily used by parties that are (a) small, (b) cash-strapped, and (c) like to present themselves as policy-geeky.  The Greens, for example.  One might add that the unit would most likely be used by parties that believe their own mindset is most akin to that of those staffing the unit –  likely to be a bunch of active-government instinctively centre-left public servants.  Embedded assumptions can matter a lot –  The Treasury used to generate wildly over-optimistic revenue estimates for a capital gains tax, and it was probably no coincidence that as an agency they supported such a tax. 
  • the policy costings unit seems, in effect, to largely represent more state-funding for (established) political parties.  That might appeal to some, but even if you thought more state funding was a good idea (and I don’t) it isn’t obvious why this particular form of delivery is likely to be the best or the most efficient.  Money might be better spent on research and policy development (say) rather than “scoring” at the end of the process, for detailed plans that will almost inevitable change before they are ever legislated.  And if we want to spend more on policy scrutiny, I reckon a (much) stronger case could be made for better-resourcing parliamentary select committees.
  • the interim proposal for next year’s election would enable only parties already in Parliament to utilise the facility.  Again, this has the effect of further entrenching the advantage established parties have in our system (I hope it will be re-thought when the legislation itself is considered).
  • practicalities matter: there probably won’t be much demand on a policy costings unit in the year after an election, and could be quite a bit in the year prior to one.  How then will be unit be staffed and a critical mass of expertise maintained?  If people are seconded in from government agencies, would we really have an independence (including of mindset and model) at all?  And costings skills aren’t readily substitutable with bigger-picture fiscal policy (or macro policy) analysis skills.
  • the lack of transparency around the proposed institution should be deeply concerning.  As far as I’m aware there has not yet been any indication as to whether the policy costings unit would be subject to the OIA (as the Auditor-General and Ombudsman are not, and nor is Parliament more generally).   The Minister of Finance has indicated that any costings the unit did would only be released with the consent of the political party seeking the costings.  That should be a major red flag.  In my view, any new unit should be (a) explicitly under the OIA, and (b) the enabling legislation should require that any costings done for political parties should automatically be released 20 working days after being delivered to the relevant political party (or more quickly if the costing is delivered within 20 days of an election).  A policy costings unit should not be a research resource for political parties – the only possible basis for confidentiality – but a body that at the end of the process provides estimates based on the details the relevant party has submitted. (As I understand the system in Australia, costings provided during the immediate pre-election period are automatically released, but others are not.)

In sum, I’ve become quite strongly opposed to the notion of a costings unit.  Mostly it probably won’t do much harm – I thought some of the comments from Simon Bridges were a bit overblown –  and relative to other stuff governments waste money on to buy off their bases or to win over small support parties (Super Gold Card anyone) it is probably small in the scheme of things.  It won’t improve policymaking, it won’t change the character of elections, but it might –  at the margin –  create a few more jobs for economists.

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Monetary policy effectiveness

When commenting a couple of weeks ago on the Reserve Bank’s Monetary Policy Statement I observed that

there was some rhetoric from the Governor at his press conference that I quite liked, including the reaffirmation of the effectiveness of monetary policy

I’ve not seen any reason to doubt that monetary policy remains pretty effective for now (although the lower limits of conventional monetary policy are approaching), and if I’ve had a criticism of the Bank over the decade it is that it has been too reluctant to use monetary policy as it should be, transfixed as they long were by outdated views on the level of neutral interest rates and a consequent view (shared by many of their peers abroad) that with interest rates this low, inflation would surely rebound soon.  In short, central banks –  ours included –  materially overestimated the amount of monetary stimulus actually being provided.

In the wake of the Governor’s comments, I was interested to see that last Friday the Reserve Bank released a short Analytical Note reporting the work staff had done to underpin the Governor’s claim about effectiveness.  It was good to see, both because public agency transparency is a good thing in itself, and because on several occasions in the past it has turned out that bold claims the Governor had made in press conferences were backed by precisely no supporting analysis.

The summary of the work done in the published note reads as follows

We use three different models to evaluate monetary policy transmission. These models show that a 25 basis point cut in the Official Cash Rate (OCR) leads to an increase in inflation and GDP growth, and that this response is as big today as it was before the GFC. This implies that the recent OCR cuts by the Reserve Bank will lead to – all else equal – higher inflation and GDP growth, and help support maximum sustainable employment (MSE).

Using data since 1993 they estimate models up to the end of 2007 and then add new data quarter by quarter and see if there are any changes in the estimated effect of a monetary policy change on inflation and GDP growth.   The short answer –  on these measures –  is “not much”.  Here is their chart.

AN.png

In this exercise they are using the 90 day bill rate as the instrument of monetary policy (the OCR wasn’t introduced until 1999).   And they recognise that you cannnot simply look at what happens after the 90 day bill rate changes, because the bill rate changes (or OCR changes now) are often reflective of stuff going on in the economy or inflation.  Thus, in their words,

In order to disentangle the effect of monetary policy on the economy, our analysis uses modelling devices commonly known as monetary policy ‘shocks’. These shocks help isolate the effect of a move in the OCR that cannot be explained by the state of the economy.

Which is just fine, in principle, but then a great deal depends on how well the authors were able to identify the “shocks”.    And we don’t know the answer to that, including because they don’t show us the data (which quarterly changes do the models treat as “shocks”, and to what extent).

The authors note only two limitations to their work.  The first is the standard caveat: the models are linear and can’t easily cope with any non-linear behaviour.  The second –  really a ritual bow to their new statutory mandate –  is that they chose not to look at labour market effects, but as they note employment changes are pretty closely correlated to GDP changes so it isn’t much of a limitation at all.

Much as I’m pleased to see the paper published, and am inclined to share the Bank’s judgement about policy effectiveness, I think there several other limitations or caveats that leave me not really that convinced that the reported model results are as persuasive as the Bank would like to believe.

The first caveat is that we simply don’t have much data for the more recent period.   Here is a chart of short-term interest rates (data from the RB website) for the period being studied.

short-term rates

There was a great deal of volatility in the first six years of the period (pre-OCR), considerable variability in the subsequent decade, but since the crisis cuts came to end in April 2009, very little variability at all (from April 2009 to earlier this month the OCR had been in a range only 200 basis points wide).   The two tightening cycles the Bank inaugurated both had to be reversed in pretty short-order, before anything like the full effects (on inflation and GDP) of those policy changes could be seen.

Now, as I understand these models, you don’t need to have had an OCR change to have had a “monetary policy shock”: sometimes the data will have changed and the OCR will have been left unchanged, and the model will tell you that there is a “shock” there –  the OCR wasn’t changed when, in some sense, it perhaps should have been.   But that isn’t really very helpful, since almost always when the policymakers left the OCR unchanged they had in mind unchanged policy (as did markets and firms/households), and the empirical exercise is trying to deduce answers from what the models think of as policy mistakes, but policymakers at the time did not.    From a policymaker’s perspective, not much was done with monetary policy in the decade after 2009.  With a small sample, you simply can’t answer many questions.

The other caveat is that the Bank’s modelling uses the 90 day bill rate (more recently as proxy for the OCR).   That is fine –  it is very close to the instrument the Bank has direct control over.  But that isn’t the rate most people –  firms or households – transact at.  This chart shows the margins between the 90 day bill rate and the three retail rates for which the Bank publishes long time series.

margins

For most of the pre-recession period –  and particularly the first years of the OCR period –  the margins were very stable.   Through most of the 00s, you could look at monthly changes in floating mortgage rates, term deposit rates, business overdraft rates, the OCR, or 90 day bill rates and get almost exactly the same answer.   In that environment, a simple model with only a single interest rate made a lot of sense.  But the picture has been quite a bit different since then –  not just the levels change in these spreads during the crisis period itself, but even in the subsequent decade.   The OCR/90 day rate may still be a significant influence on the exchange rate –  not something mentioned in the Bank’s paper at all – but changes in it (including estimated “shocks” to it) seem unlikely to mean the same thing in respect of domestic borrowing, investment etc, as it did in the pre-2008 decade.

To repeat, I’m inclined to agree with the Bank that monetary policy remains pretty effective.   Perhaps what the Bank has done is the best that could be done for now. But I’m sceptical that these particular results should provide as much comfort as the Bank would appear to like us to take.     The authors end the paper this way

AN conclusion.png

Which, frankly, seems a bit glib and over-confident.   It is, after all, now almost a decade since core inflation was as high as 2 per cent –  the target midpoint the Bank was charged to focus on.   They might well be right about monetary policy being as effective as ever, but if I’d undershot my target for a decade I don’t think I’d be selling my wares under a “business as usual” slogan.  The important distinction is that, quite probably, monetary policy is as effective as ever, but using it well depends on the Bank’s understanding of the inflationary processes (ie decent backwards analysis and forecasting).  They didn’t do that very well for some considerable time.  Whether things have now improved –  moving on from “business as usual” –  remains at very least an open question.

As it happens, this morning the Bank released the text of a short speech by Assistant Governor, Christian Hawkesby, which also touched briefly on some of these issues.   He made reference to the research results in the Analytical Note (see above) but personally I found his less formal remarks resonated more:

Finally, it fits with recent experience that monetary policy does still have bite even in this low interest rate world.

In New Zealand, we lifted the Official Cash Rate by 100 basis points over the course of the first half of 2014 to head off an expected increase in inflationary pressure. When this did not arrive as expected, the tightening in monetary policy ended up being one factor that contributed to the slowing in the economy into 2015. Internationally, we have also seen the US Federal Reserve tighten monetary policy through to 2018, and this is one factor that has contributed to the moderation in US growth and inflationary pressure into 2019. These are ongoing examples of monetary policy continuing to play a key role in inflation dynamics.

To that, I would add the pick-up in New Zealand core inflation following the OCR cuts in 2015 and 2016.

I don’t want to say much else about Hawkesby’s speech, but there was some interesting commentary on the recent decision to cut the OCR by 50 points at once.    The bits that really caught my eye were this

As part of the assessment, our discussion also touched on the decline that had occurred in both survey measures of inflation expectations and market-based measures, such as nominal and inflation linked bonds in global markets

This was new: there was no mention of expectations derived from indexed bonds in either the MPC minutes or in the MPS itself – in fact, in discussing inflation expectations over the last five or more years, Bank officials have steadfastly refused to engage with those market-based indicators (currently suggesting 10 year average inflation expectations of about 1 per cent for New Zealand). I hope this isn’t the only time they engage.

And (emphasis added)

A key part of the final consensus decision to cut the OCR by 50 basis points to 1.0 percent was that the larger initial monetary stimulus would best ensure the Committee continues to meet its inflation and employment objectives. In particular, it would demonstrate our ongoing commitment to ensure inflation increases to the mid-point of the target. This commitment would support a lift in inflation expectations and thus an eventual impact on actual inflation.

Which was interesting both because the Bank has spent considerable effort over the last couple of years telling us that inflation expectations were now just fine (“firmly anchored at 2 per cent” became something of a catchphrase).   If you are using policy to try to lift inflation expectations –  as they should be, among other things –  it is a public acknowledgement that things were not quite as they should be.

I really hope that on this matter Hawkesby really is speaking for the MPC as a whole (there is no disclaimer on the speech suggesting they are just personal views).  All else equal, if inflation expectations (survey and market measures) don’t rise, it would provide underpinning for further cuts to the OCR, whether or not the local or global economic data deteriorate from here.

 

 

A good time to invest?

A day or two ago I started reading a new book on, among other things, the decline in trust in “experts” that is said to increasingly pervade Western societies.  I’ve written previously about my scepticism that supposed experts are people we should repose much trust in, on things other than the most narrowly technical matters.  I want an expert carrying any surgery I or my family need and when, for example, it comes to house renovations

A good architect, and capable expert builders and other tradespeople, can together enable an outcome that I couldn’t deliver myself. Most of us need, and value, expert advice, and expert execution, but the decision to renovate the house, and how far to go, is the customer’s. It is about choices and preferences on the one hand, and advice from experts who actually usually know what they are doing on the other.

It isn’t clear to me that there are very many areas of public policy where arrangements should be much different.

And I often wonder just how much real expertise –  on matters beyond the most narrowly techical – can be found in most of the public sector agencies in which some encourage us to place our trust.   The Governor of the Reserve Bank is one of those figures in whom the law places a great deal of power.   Doubts about whether that is a wise choice, at least about the incumbent, were given further fuel by his performance on TVNZ’s Q&A last night.

I don’t have the time today to unpick it all, including his continued claim that fiscal policy is adding to demand/activity, when The Treasury’s fiscal impulse measure suggests it isn’t (all that has happend in the Budget update numbers is that fiscal policy is now estimated to have roughly a zero effect on demand over the next few years, rather than the slight drag previously projected).  Orr seems to be champing at the bit to have the government spend more –  especially capital spending – but he was careful and never quite said so last night.

Where he is much less careful is around investment more generally.    Last night he followed up from his claim at last week’s press conference that the country was in a great condition, with the renewed suggestion that now was a wonderful time to invest, that businesses need to “keep going” on investing, and that it was hard to be nervous about investing with such low risk-free interest rates and (so he asserted) such low hurdle rates of return.  (Doesn’t he follow the world news?)    This wasn’t just so in New Zealand apparently: there were global “infrastructure deficits” and generational opportunities.  Closer to home his extraordinary assertion was the New Zealand had only “quality problems” –  the bizarre line John Key used to use about Auckland’s housing and transport problems.

You really have to wonder what insight the Governor thinks he is blessed with that eludes people in the private sector and in government, here and abroad.   It isn’t as if he offers us a detailed piece of argumentation and analysis in support of his story.  It seems to be mostly just handwaving and wishful thinking.   Not exactly a sound basis for policy, or for encouraging us to put any trust in him.

In writing about the MPS last week, I reproduced one of the Bank’s own charts about investment.

bus investment RB

Business investment –  in blue –  has been fairly weak and (if anything) weakening further.  It is not just some sort for post-election blues, businesses not liking having Labour and the Greens in office.  The picture is pretty consistent for years now.   Which suggests it might be reasonable to suppose that people who own,  or are considering starting, businesses have been making rational choices, with the information available to them, about the prospects for investment in New Zealand.  In sum, not particularly good –  and this despite the considerable boost to demand (and need for domestic buildings etc) that a big unexpected shock to the population will have given rise to.

Consistent with that, the Governor may not be aware that productivity growth in New Zealand has also been lousy for years now –  almost non-existent in the last few.  Profitability and productivity are not, at all, the same thing, but they often go hand in hand –  great opportunities, offering high returns to shareholders, are often ones that will tend to lift the overall productivity of the economy.  New productivity opportunities are often only realised through a new wave of investment (which firms will only undertake if they expect those projects to be profitable).

And we could add to the list of symptoms –  perhaps the Governor also counts them as “quality problems” –  things like a tradables sector that has been going sideways, exports as a share of GDP not rebounding at all, the failure of the government to do anything material to fix the housing market, high corporate tax rates, and a range of actual or looming regulatory restrictions on investment opportunities in New Zealand.   Not the sort of things most people would call “quality problems”.

Of course, the Governor is particularly keen on more public capital spending –  infrastructure.   But, here again, if the opportunities were so great, the numbers would be likely to speak for themselves –  really high benefit/cost ratios showing up when projects are evaluated.  Perhaps the Governor is privy to such estimates, but the rest of us are not so favoured.  Too many of the projects that do go ahead seem like borderline cases at best.

Much of any reasoning the lies behind the Governor’s claims seems to rest on little more than the fact that interest rates are low. But in and of itself, that tells us almost nothing.  After all, interest rates are (very) low for a reason, and as I noted in my post yesterday no one –  including the Reserve Bank, at least based on anything they’ve shown or told us –  has a compelling story about just what is going on and why.   But the revealed behaviour of firms doesn’t suggest they’ve seen it as some windfall that means it is a great time to invest –  with perhaps the only challenge being which of the abundance of riches of possible high-yielding projects one might tackle first.

Out of interest I had a look at other advanced countries.  After all, these extraordinarily low interest rates prevail across almost all of the advanced world (and, as I’ve noted previously, implied forward rates are still higher here than in most countries).  The IMF has data on total investment as a share of GDP for a group of 30+ advanced economies.  In all of them, real and nominal interest rates are (of course) far lower than they were in, say, the 2000s prior to the 2008/09 recession.   Notwithstanding that, for the median of these 35 advanced countries, investment as a share of GDP last year was 2.7 percentage points of GDP lower than it just prior to the crisis/recession.   That is a significant reduction, despite the wonderful investment climate the Governor blithely talks of, in which it would be hard for anyone to be nervous about investing.   Only four of the 35 countries had investment now higher than it was then (Sweden, Norway, Germany, and Austria –  only Sweden more than 1 percentage point of GDP higher).

Now, these IMF numbers are total investment not business investment, and I don’t have the time today to recalculate the business investment numbers (for OECD countries), but it isn’t a picture that suggests that most people actually making investment choices share the blithe optimism of the Governor.   It isn’t particularly confidence-inspiring, or suggestive that he knows much on this topic on which he opines so often.

He could, of course, be right.  Perhaps there really are opportunities just left on the table, even though they offer high returns and/or modest risk.  If so, the market is open.  There is nothing to stop the Governor handing over the reins at the Reserve Bank and seeking an appointment as a private sector CEO, or indeed attracting capital from new investors to start his own enterprise.

I imagine most people will be content to respect the wisdom of crowds –  without necessarily fully understanding it –  and to conclude that when investment has been sluggish for years, even as aggregate demand is ok, labour is fairly fully-employed, and credit conditions haven’t been overly constraining that, despite the very low interest rates, there are huge numbers of attractive propositions going begging because people with their own money at stake aren’t persuaded by the Governor’s rhetoric.

We have very serious economic problems in New Zealand.  They aren’t being addressed by our politicians or our officials, and the Governor seems more interesting in playing distraction, whistling to keep spirits up, than getting to the bottom of those really serious and longrunning economic failures.    Fortunately, in his current role the Governor has almost no say over investment –  other than to opine –  but the lightweight rhetoric does nothing to instill confidence about his handling of those areas where he has great (and excessive) power: bank capital for example.

On other matters, an unexpected family death means I’ll be in Christchurch for the next few days and there won’t be any more posts until Monday.