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.