I’m not sure why the Governor chose to hold a press conference this morning after the MPC’s announcement. Were he an authoritative figure, perhaps it might have been some use. Such a figure might have been able to offer thoughtful narrative, or framing, for what is going. But this was Orr, a sadly diminished figure, inadequacies fully found out in a crisis. And the press conference only confirmed that grim assessment. He should be replaced.
In fact, probably the only worthwhile thing to emerge from the press conference was that Deputy Governor Geoff Bascand is clearly the adult in the room, including that he was the only one of the three MPC members speaking who was willing to call a spade a spade regarding the economic consequences of what is unfolding. He has chief executive experience. He’d be a superior Governor to Orr (not ideal, but – as I noted before the appointment was even made, when Bascand confirmed that he’d applied for the job – a safe pair of hands).
As for Orr himself, there seemed to be no contrition at all for the February MPS (the one where they moved to a tightening bias) or for all that complacency in speeches and interviews just a few days ago. He told us we should listen to the health experts etc – quite possibly, but we should have been able to listen, and count on to act aggressively, economic and financial experts in our Reserve Bank. Instead, we got Orr and Hawkesby last week, given cover by the rest of the MPC and the Bank’s Board.
There were odd lines. He claimed the exchange rate was acting as a buffer, and yet (a) the fall in the exchange rate is very limited compared to the experience in typical New Zealand recession, and (b) as he was talking, at least against the USD the New Zealand was higher than it was at 7 this morning (not very surprisingly, given that the Fed cut even more than the RBNZ did, on top of an earlier large cut).
And there was the confirmation of the point I highlighted in my earlier post. They felt they couldn’t cut the OCR below zero because not all the retail banks were “ready”. Strangely, no journalists challenged Orr on this. Isn’t crisis preparedness for the system a core part of what the Bank is going as regards the financial system? Haven’t they been talking about negative rates as a possibility for a couple of years? Haven’t other countries had negative rates for longer than that? There is some legitimate debate about the usefulness of negative rates, but it is a gross dereliction of the Bank’s responsibilities not to have ensured long ago that all players could manage negative rates (in their systems etc). And, of course, no contrition for that failure either.
We even had attempts to play down the coronavirus experience in New Zealand as well (“only a few very isolated cases”) something he’d surely just have been better to have shut up about.
He claimed they’d provided details of their unconventional policies in his long speech last week, even though that speech was very light on detail, and promised a series of more detailed papers to come. No word on those today. He gushed about the capabilites of his unconventional instruments, but seemed to have no developed mental model for the relevant transmissions mechanisms. It wasn’t exactly confidence-inspiring.
And then there was three final points worth noting:
- asked if he was anticipating a recession, instead of simply saying “yes”, or “yes, a very serious one” – surely the only honest answers – he got into a debate with the journalist, apparently hung up on the (supposed) technical definition of two quarters of GDP falling. He was prepared to concede “a period of very weak economic activity” but when pushed on a recession he would only fall back on “I don’t know”. Every one else does. He did finally concede that on some of the Bank’s scenarios – really only some? – there would be a recession in New Zealand.
- asked about his response to suggestions that the Bank had moved “too little too late”, his initial response was “Nothing”. He simply wouldn’t engage. And then he tried to make a virtue of MPC’s inordinate delay, claiming – is the man serious to even raise this? – that acting earlier wouldn’t have stopped the virus. Then we got rhetoric about the importance of a medium-term framework for monetary policy – a strange claim on the morning of an emergency cut – and the value of fuller information, as if any information will ever be enough or definitive. He then had the gall to claim that New Zealand was now in the “best possible position”.
- and finally, there was a suggestion in Parliament a short-time ago (early last week?) that the Bank was trying to pressure banks not to be too negative in their commentary. It was never actually confirmed, although there is reason to believe they were told- by the Bank – to exercise a sense of “social responsibility” in their commentary. That was exactly the line Orr ended his press conference with today, to all the assembled media. From an organisation that minimised the issue for so long, that really should have been a lot more alarmed and active earlier on, it is simply an unacceptable stance (more so than ever, since powerful government agencies should be welcoming, scrutiny, alternative perspectives etc – especially in uncertain times like this – not (ever) trying to get happy-talk coverage.
It was a sadly revealing performance, as to just how unfit for office Orr is. And of how he and Grant Robertson, Neil Quigley, the rest of the Bank’s Board, and the rest of the MPC have let New Zealand down.