Wholly inappropriate

Michael Reddell Central banks, conflicts of interest, Reserve Bank

It didn’t used to be terribly controversial that powerful independent government bodies and powerful statutory officeholders should “stay in their lane” or “stick to their knitting”. Those entities/individuals typically have a pretty narrow set of official statutory responsibilities and if they are exercising power independently of the naturally-partisan governments of the day, they should focus their energies on those official responsibilities and keep quiet about, and keep out of, other stuff. Central banks are a classic example. Independent central bankers exercise enormous delegated power in some narrow and specific areas (monetary policy, banking regulation). Part of the way they build and retain trust – our willingness to delegate that power to them – is by doing the day job excellently. But one of the other ways is by staying out of other highly contentious and/or party political stuff. We need to be able to be confident that these very powerful people aren’t using their (rather limited) official position to advance personal ideological or political agendas. And, frankly, that should be so whether or not we as individuals might happen to agree with a particular cause the powerful decisionmaker happens to be advancing (I’ve written here previously (see link above) about Orr in this respect, but also the very dubious case of Don Brash – as Governor – and the Knowledge Wave speech, some of which I did agree with). As I noted in an earlier post

We should value a good independent central bank, but the legitimacy of the institution –  and its ability to withstand threats to that independence –  will be compromised if Governors play politicians or independent policy and economic commentators.

And that applies to statutory members of the Monetary Policy Committee too, especially ones employed fulltime in the service of the Reserve Bank.

(Here I would note that, rightly or wrongly, central bankers have tended to be given more societal leeway to weigh in on this, that or the other policy issue when the central bank itself is perceived to have been doing its day job excellently. No serious observer would accord that description of the Reserve Bank of New Zealand in the last few years,)

I opened The Post this morning to find a headline “Cutting a $20b fossil fuel bill”, and read on. It was a report on a new paper from a think tank called “Rewiring Aotearoa” championing widespread electrification and all sorts of policy levers in support of that end. Fair enough you might suppose, were it coming from the Helen Clark Foundation, or really anyone independent. They are welcome to present their arguments and make their case. But it wasn’t until I got halfway through the article that I learned that “it was co-written by Reserve Bank chief economist Paul Conway”.

The chief executive of this think tank, one Mike Casey, was at pains to assure us that

So, at least according to Casey, the Reserve Bank didn’t “endorse” the document, but had it seems done enough checking to know that it was all “economically viable”. Quite whether that is how the Reserve Bank would see it – having its imprimatur asserted by Casey – is not clear (one would hope not). Casey himself seems like a pretty entrepreneurial guy – and was featured on Country Calendar last year around his impressive central Otago cherry orchard – but……he isn’t a central bank statutory officeholder wielding considerable power/influence over the macroeconomy and not supposed to be using his office, or associations, to advance personal agendas.

I went and downloaded the report, which was apparently released yesterday at an online event in which the two speakers were an Australian entrepreneur/author and Conway. There were four authors of the paper but Conway is one of the two used to market the release.

I opened the report and the concerns grew. On the first page I found this

So Conway’s involvement in this report is explicitly linked to his rather important day job as chief economist of the Reserve Bank. Conway must have been aware of this, highly inappropriate, linkage being drawn (he is a co-author, it is on the very first page).

Then I went looking for any sort of disclaimer. Often enough, when official agencies publish their own research reports there is a standard disclaimer noting (generally not very credibly) that views expressed are those of the individual and not necessarily those of the institution they work for and which is publishing the research. Here, as illustration, is an example from a recent Reserve Bank research Discussion Paper

But there is no disclaimer at all on the Rewiring Aotearoa paper that Conway co-authored and fronted, even as he is presented by them as the chief economist of the Reserve Bank. Conway simply cannot be unaware of this lapse: even if he was authorised by the Reserve Bank to get involved in this project in whatever spare time he has, surely they and he would have been bending over backwards to ensure that there was no association between this involvement and the Bank? A disclaimer would have been the bare minimum. At least among central bankers with any regard at all for appropriate boundaries.

Perhaps you wonder if all this is just very technical and not worth bothering about. Well, here (from Rewiring Aotearoa’s LinkedIn)

This is a highly political project. And there is nothing wrong with that – it is how policy debate goes – but not the place for the central bank’s chief economist (and even less when pro-actively identified as such, with not even a hint of a disclaimer in the official report, even while the champion of the project claims that the Reserve Bank thinks it is all very robust or they wouldn’t have let their chief economist get involved.)

Or there is this from the report itself

I’m sure parts of the political spectrum will really welcome the report and be cheering on its state-led approach. But senior central bankers aren’t supposed to be championing divisive causes – at least not ones other than those Parliament has specifically assigned to them.

You’ll note earlier that the report described Conway as having given his “personal time” to working on this report. One does wonder quite how much spare time a senior manager of the Reserve Bank actually has. After all, this is an agency that has been coming off the back of the biggest policy failure, in Conway’s own area, in decades (the sustained outbreak of inflation, only just now getting back inside the target range). It was Conway himself who was on record after the May Monetary Policy Statement lamenting potential problems with either the modelling tools or the Bank’s use of them (both things the chief economist might be thought primarily responsible for). Mind you, this was the same Conway who chose to take his holidays and miss the (July) Monetary Policy Committee meeting where the MPC executed perhaps its biggest U-turn in decades in such a short space of time. Very few people looking at the conduct of monetary policy over the last six months (hawkish lurch in May, quick reversal in July, rate cut in August, all on not much new data) would think that all was well in the economics functions of the Reserve Bank, and that it was appropriate for the Bank to be signing off on its senior officeholder getting heavily involved in any other project, no matter how non-political or innocuous.

And is if all that wasn’t enough, it is worth remembering the Code of Conduct governing MPC members

And the Reserve Bank staff conflicts of interest policy

Conway’s boss is the underqualified Karen Silk, but it is hard to believe that this involvement wasn’t signed off by the Governor himself. It shows remarkably poor judgement by all three of them (Silk, Conway, and Orr), around both the initial involvement and the active identification of Conway’s involvement in the Rewiring Aotearoa report and the absence of any serious disclaimer (not that the latter would have materially allayed concerns).

I’m sure work in the area of this report was after Conway’s own heart. His inclinations seem to be to the technocratic left, and his professional experience has been most strongly in these microeconomic areas and issues around productivity. But he chose to take up a role as a senior statutory officeholder, wielding huge influence over the near-term performance of our economy. That needs to be his focus, and we need to be able to trust that he – and his colleagues – are using their professional endeavours only for the narrow task Parliament has given them.

In a serious world, the Minister of Finance and the chair of the Reserve Bank’s Board would be asking hard questions about all this, including around the judgement of those involved. In latter day New Zealand (with Quigley and Willis in those offices) it seems sadly unlikely. And so standards degrade even further, and there is a bit less reason still to have any trust in or respect for our central bank.

17 thoughts on “Wholly inappropriate”

    • Easy to imagine her response (same as when concerns were raised about Orr and the banks/NZI a few months ago): “oh, that is a matter for the Board chair, not for me”. I just yesterday got an OIA back from here about the Quigley reappointment: as far as i can see the only substantive reason advanced was “Neil has a good relationship with the Governor”. As if, in context, that isn’t a big part of the problem.

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  3. The thing that puzzled me in the article promoting it in this morning’s Post was that it seemed to be saying (1) that solar is now competitive in its own right and (2) that it should also be subsidised. But why? The ETS exists to price carbon. Why did the article not make the case for the disjuncture it seems to be proposing. Perhaps the report you downloaded makes the case?

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  4. Michael,

    Spot on commentary about RB.

    I hope you are able to do a submission about this and other matters to the FEC enquiry into the banking industry.

    Orr has taken the Bank out of its lane in a number of wasteful respects, especially on climate matters and Maori stuff. The climate focus is particularly inappropriate given that in contrast to the UN framework applies here, that NZ is probably already carbon negative if we applied a full accounting for all the carbon sinks we have like the millions of acres of DoC land, especially the Fiordland forests. I see a few bits of research on this aspect but apparently a long way to go.

    Neither Silk or Conway are well qualified for their jobs, either by formal qualification or by experience, and it seems maybe not even by mind set.

    Keep up the good work!

    Best wishes.

    Mike Walsh (ex-RBNZ staff 1973 -89)

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    • Thanks Mike. Nice to here from you. I’m a bit more open to Paul Conway being qualified for the job – he wasn’t an ideal candidate, but he seemed better than the person he replaced (and finding anyone half-decent willing to work for Adrian was always going to be a challenge).

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  5. Someone complained to my govt department employer about one small comment I made on LinkedIn in early 2023 that could be read as critical of a previous PM.

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  6. Spot on again CC, seems to be a case of they thumb their noses and she blinks. In all these situations, you wonder how much “personal” time was involved.

    The timing is fascinating, with our electric power supply already at risk from low water, low wind, and the headlong (headless?) rush away from gas as reliable back-up for hydro. Industry is shutting down and these clowns say stay with net zero but let’s just go faster. Time for Government and power companies to have a read/reread of Professor Michael Kelly’s cautionary words in his 2022 Net Zero for New Zealand report.

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  7. Rewiring NZ doesnt want rich people to invest in solar and move off the grid as it will make the lines companies uncompetitive and therefore increase the cost of power for those who cant afford to move off. Direct response to a question from Mike Casey

    Without reading the report, ive been to a presentation from these guys, this is also about social re engineering etc etc.

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  8. This piece deserves a wider audience Michael – it is yet another signal that the whole Public Service has become unmindful of its core mission: delivering the core services regardless of political party occupying the Treasury benches, plus executing professionally the policies of the party/party’s that gained a democratic mandate at the latest general election.

    Having worked in a few government agencies, between working for private enterprises, over the last 30 years I can say that politicization of the wider Public Service is now markedly more apparent when in the late 90’s it wasn’t anywhere as overt.

    Ms Willis needs to get a plan sorted for the RBNZ and start a process of whittling out the openly wasteful senior management and their rubber stamping board. But I suspect she won’t as she projects as a Leftie with a financially responsible bent…

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  9. Michael, I agree that you are right to go after Paul Conway.

    In reality, the situation is much worse than what you have described, because neither the increasing concentration of carbon dioxide in the atmosphere, nor the increasing concentration of methane in the atmosphere, have any significant effect on our planet’s climates or mean temperature.

    Over four years ago, on 6 August 2020, a peer-reviewed paper by Physicist Professor Emeritus Dieter Schildknecht was published, in which he calculated that the climate sensitivity of carbon dioxide (CO2) is only 0.5 Celsius degrees, which is one-sixth of the IPCC’s ‘best estimate’ (read ‘best guess’). (The climate sensitivity of a greenhouse gas is defined as the increase in Earth’s mean temperature caused by every doubling of the atmospheric concentration of that gas.)

    The very next year, without ever having heard of Schildknecht or his paper, Physicists David Coe, Dr Walter Fabinski, and Dr Gerhard Wiegleb (Coe et al.), independently calculated from fundamental physics and the HITRAN database of the spectroscopic properties of gases, exactly the same result as Schildknecht for the climate sensitivity of CO2. Further, Coe et al. calculated that the climate sensitivity of methane (CH4) is a miniscule 0.06 Celsius degrees, and that of nitrous oxide (N2O) is an almost-as-miniscule 0.08 Celsius degrees. The Coe et al. paper was published over three years ago, on 23 August 2021.

    Neither the Schildknecht paper nor the Coe et al. paper has ever been refuted.

    People who refuse to accept that the four aforementioned physicists are correct, whilst being unable to provide any proper scientific refutations of those physicists’ two papers, truly are physics deniers, yet many of them have the gall to call me a climate denier.

    In his 2021 Error Report to the IPCC, in terms of its own Protocol, David Coe wrote:

    “Anthropogenic global warming will be small. There has been no global-warming trend for more than seven years (HadCRUT5). We calculate that the total warming which may be attributed to the increase in CO2 levels from the pre-industrial period of 280 ppm to the present 420 ppm is just 0.24 degrees Celsius.”

    The IPCC totally ignored – and has done so to this day – David Coe’s Error Report, demonstrating that it is not a scientific organisation. Rather, the IPCC is not only incompetent, but is also a blatantly corrupt political organisation that has ZERO CREDIBILITY.

    The Coe et al. calculation of the climate sensitivity of methane shows that it is a miniscule 12% of that of CO2. This leads to the conclusion that the IPCC’s current claim that the efficacy of methane is 7 times that of CO2 (having recently reduced its ‘best estimate’ from 28 times to 7 times) is still too high, by a mind-boggling factor of 58 (7 ÷ 0.12 ≈ 58). Physicist David Coe has confirmed to me that my calculation of the factor of 58 is correct.***

    Unrefuted physics has therefore shown that carbon dioxide is insignificant as a greenhouse gas, and that methane and nitrous oxide are even more insignificant.

    The IPCC’s aforementioned ‘best guesses’ are therefore worse than that – they’re wild guesses!

    The Rt Hon Winston Peters is therefore spot on with his latest comments on ‘climate change’. I commend him for speaking out. It’s a great pity that he has not, so far, been joined by his woke parliamentary colleagues.

    It’s time to end the climate scam — it’s gone on for far too long.

    People are welcome to email me and ask for a copy of the latest version of my 8-page article on this matter. It gives the URLs for the two aforementioned papers.

    Peter J. Morgan BE (Mech), Dip Teaching

    Honorary Chair and Honorary CEO

    Environomics Global Trust

    PJM.forensic.eng (at) gmail.com

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    • Interesting comments thanks Peter. That said, my approach to this episode is quite independent of whether or not I think the substance of the piece he worked on was right or not. I’d be quite as uncomfortable if (say) a senior RB official was moonlighting with the NZ Initiative on a paper championing (eg) much lower company tax rates, or other reforms I personally favour. Key point is “staying in your lane”, or find another job where you can pursue your personal interests/passions.

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  11. There is only one lane in NZ politics and that lane is called “follow the money”.

    Growing central bankers wealth through an agenda in this case a carbon trading industry , Carbon taxes, Green Hedge funds, ” green” borrowing, and keeping a generation anxious frozen in fear ( mind controlled) are bonuses for the central bankers status quo.

    The earths climate has always been in a constant state of change . We have to talk about the climate( and the IPCC) as they are using fraud. The State are not questioning any policy coming from the central bankers private international organizations.

    Get people reliant on electric cars then sting them on RUC and increase the (partially foreign owned- w Blackrock control ) retail electricity . Can I ask you why when we the taxpayers funded the State energy monopoly that has 80% renewable we are then double dipped (charged retail prices) by Transpower’s middlemen retailers? Some like Genesis are set up as credit providers . And they are trading energy futures for which we the people see no benefit (dividends).

    When you see that we have an economic monopoly of the central banksters and all nation State lending and policy is from them , Yes its inappropriate .

    And its now global, you’ll find what once was once labelled ” conspiracy theory about the WEF ” is fact. EG The UN is marketing their policy ” international tax” ( no one voted for this private organization to make up and dictate the central banksters taxation policy of their nation). The private global organization the WHO decides and not the nation state govt when there is a ” pandemic” and what their made up rules and regulations will be.

    Agree political policy from the bankers is inappropriate.

    “Give me control over a nations currency, I care not who makes its laws.”–Mayer A. Rothchild , member of banking cartel. Federal Reserve not so federal

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