Other people OIA the Reserve Bank too

Occasionally I have a look at the Reserve Bank’s website page on which they post selected OIA responses.  This time I was just checking to see whether a response I got yesterday –  after 2.5 months, and still only partial –  was there (it wasn’t).  But I spotted this response to someone else, released last Friday

Dear …..

On 12 December 2017 the Reserve Bank received a request from you, via http://www.fyi.org.nz and pursuant to section 12 of the Official Information Act 1982 (the OIA), asking:

In the recent recruitment process to appoint a new Governor of RBNZ (which resulted in the Board recommending to the Minister of Finance that Adrian Orr be appointed as Governor), please advise: 1. How many of the total applicants/individuals considered for the role were: a) women; or b) non-Pakeha; or c) both.

2. What was the total number of applicants/individuals considered?

3. If there is a shortlisting process, how many of the individuals who were included on that shortlist were: a) women; or b) non-Pakeha; or c) both.

4. If there was a shortlisting process, how many individuals were included on the shortlist in total?


The Reserve Bank is declining your request, as allowed by section 9(2)(a) of the OIA, in order to protect the privacy of the candidates considered for the role of Governor.

Given the nature of the process and the final pool of candidates, releasing the information that you have requested is likely to identify people who were considered but not appointed – which is private information.

In other words, they refused to release any of this information at all.

Which should be pretty extraordinary really.   The Board’s defence is that they are withholding the information to protect the privacy of candidates.    But they ran a search process that included a public advertisement inviting applications.  I suspect they had several dozen applications, some less serious than others.   How could anyone’s privacy be breached by releasing the total number of applicants (plus the number of any people the Board themselves put directly into the mix)?     How could anyone’s privacy possibly be breached if it were known that three women and three “non-Pakeha” had applied (we know there was at least one in the latter category, since Adrian Orr has some Cook Islands ancestry)?  And how could anyone’s privacy be breached by revealing how many people were on the shortlist?

I’m a little more sympathetic in respect of question 3.  If there was, say, one woman on the shortlist, that might reasonably invite some speculation as to who, but even then it is hard to see how –  in a universe of say 1.5 million adult women in New Zealand –  a person’s privacy could have been breached.  And, given that the Bank has been notoriously weak (for whatever reason) in appointing women to senior positions, it might have been somewhat reassuring to the public that one (or more) women had made the shortlist.   As it is, we know there was at least one “non-Pakeha” in the list since –  as the Board tells the requester later in the letter –  Orr is quite open about the Cook Islands aspect of his heritage, and if perchance there was more than one “non-Pakeha” on the shortlist it is still hard to see how any one specific person’s privacy would have been jeopardised.

But in a sense, the really interesting bit of the letter is the final paragraph of the extract above.  It is factually false for one thing (names of people the Board considered are official information –  not private information –  even if protected from disclosure by the “privacy of natural persons” section of the Official Information Act).  But, if the Board is to be taken at its word.

releasing the information that you have requested is likely to identify people who were considered but not appointed

They don’t say “invite speculation on possible names” but “likely to identify people”. It is hard to imagine how it could do so –  reasoning outlined earlier – unless the shortlist included the name of a “non-Pakeha” woman (the subset of potentially credible candidates fitting this description seems likely to be very small indeed).   But even if it did, it would require a wider knowledge and a richer imagination than mine to guess –  let alone “identify” – who such a person might have been.

I rather doubt the Board should be taken at its word on this point –  rather they probably just didn’t want to release anything and waved their hands to construct a defence –  but if any readers do want to take them at their word, I’d welcome suggestions as to who the person might have been.

The Reserve Bank’s McDermott again

Earlier in the week I wrote about Reserve Bank chief economist John McDermott’s rather strange attempt to distract attention from the Bank’s own GDP forecasts –  which some had suggested were a bit optimistic –  by suggesting that private bank economists didn’t understand the process the Reserve Bank used, and even using the word “nonsense” in an attempt to bat away what seemed like quite legitimate questions.   Somewhat to my (pleasant) surprise, Westpac  – one of the banks that had questioned the Reserve Bank’s forecasts – actually went public in response , although being an institution regulated by the Reserve Bank they still seemed to feel the need to express due deference to the powerful, ending their note this way, (emphasis added)

We are comfortable respectfully maintaining that difference of opinion.

After each Monetary Policy Statement the Reserve Bank’s senior staff fan out across the country to do a series of post-MPS presentations (I used to do some of them myself).   These events are all hosted, and paid for, by the commercial banks, and commercial clients of those banks are the invited guests.  It is an arrangement that is convenient for the Reserve Bank –  the banks rustle up an audience –  but which has always seemed a bit questionable to me: preferential access to senior public officials, on sensitive policy issues, for the invited clients of particular banks.  The tone and thrust of questioning might be a little different if some such occasions were hosted by the Salvation Army or unemployed worker advocacy groups.

These occasions are supposed to be off-the-record, whatever that means.  The Bank defends it on the basis that it is supposed to let them speak more freely.  But the reason people turn up is to garner information and perspectives from –  and ask questions of – senior public officials.  And no one supposes that financial markets people in the room don’t (a) use, and (b) pass on to clients anything interesting, any different angles, that are raised when the Governor (in particular) and his leading offsiders are talking.     As I’ve noted previously, the contrast with the Reserve Bank of Australia is striking: senior officials will give speeches to private audiences, but the standard practice is, wherever possible, to post the text of the address and a webcast or audio of the address and any question and answer sessions, to minimise the extent to which some have access to Reserve Bank information/views others don’t have.

After my post the other day, a reader who had been at the post-MPS presentation John McDermott had given last Friday got in touch to pass on some of what McDermott had said there.  My reader felt –  and based on his report I agree –  that they didn’t put this senior official, or the Reserve Bank, in a particularly good light.   The reports are secondhand (ie I wasn’t there), so I’m relying on my reader to have captured the thrust of what McDermott said reasonably accurately.  But having worked closely with McDermott in the past, what I read had a ring of authenticity to it.   My reader has given me explicit permission to quote from the email I was sent.

He spent the first five minutes of his short presentation defending their record by displaying a chart showing CPI, broken down into tradables and non-tradables components, over the last 50 years or so. Essentially he was highlighting how insignificant the recent deviations from target look when you compare it to the extreme volatility in prior, pre-OCR, decades. He also claimed the RBNZ can only influence the non-tradables component and was rather self-congratulatory in how well they had done there.

Something didn’t sound quite right about that (the tradables vs non-tradables breakdown doesn’t go back that far), so I asked the Bank for a copy of McDermott’s slides (which, legally required to respond as soon as reasonably practicable, they supplied within 24 hours).    In fact, this paragraph was summarising two slides.  The first is, from memory, one of McDermott’s favourites.

mcdermott 1

In the 70s and 80s inflation was very high and volatile, and for the last 25+ years it hasn’t been.  It is a worthwhile point to make from time to time, but doesn’t have much bearing on anything to do with how monetary policy should be run right now (a bit looser, a bit tighter or whatever).  Apart from anything else, almost every advanced country could show a similar, more or less dramatic, chart.    And in the earlier decades, inflation wasn’t being targeted –  until 1985 the ‘nominal anchor” was the (more or less) fixed exchange rate.

The second chart was this one

mcdermott 2

This is presumably what McDermott was talking about when, as my reader reported,

He also claimed the RBNZ can only influence the non-tradables component and was rather self-congratulatory in how well they had done there.

There is no doubt that, in the short-term, the Reserve Bank is a pretty minor influence on tradables inflation, which is thrown round quite a bit, and most obviously, by fluctuations in petrol prices (changes in which closely track international oil prices) and the influence of weather events of fresh food prices.   The Reserve Bank can’t do much about those, and is specifically instructed (in every PTA) not to focus on them.  Of course, in the very short-term the Reserve Bank can’t do much about non-tradables inflation either –  it is quite persistent (ie not very volatile), and inflation right now is a response to monetary policy choices from perhaps 18 months ago, and economic forces (often hard to forecast) from the last year or so.

But it would be nonsense to suggest (if in fact McDermott did) either that tradables inflation is outside the Bank’s influence, or that the track record on non-tradables inflation is just fine.   New Zealand can’t do anything much about the world price of tradables, but monetary policy is a direct influence on the exchange rate, and thus on the New Zealand dollar price of tradables.    That can’t sensibly produce a stable tradables inflation rate quarter to quarter, but it can (and does) have a material influence on the trend –  “core tradables inflation” if you like.     And McDermott’s chart seems deliberately designed to avoid focus on the fact that, over time, tradables tend to inflate less rapidly than non-tradables.  As I’ve noted previously, the rule of thumb around the Bank used to be that if one was targeting 2 per cent inflation, that might typically involve something nearer 1 per cent tradables inflation and something nearer 3 per cent non-tradables inflation.

As it happens, the Reserve Bank produces estimates (from its sectoral factor model) of core tradables and core non-tradables inflation.  I ran this chart of those data a few weeks ago

sec fac model jan 18

Not only is this estimate of core tradables inflation not terribly volatile, but the gap between the two series isn’t unusually large or small.  Overall (core) inflation has simply been too low to be consistent with the target set for the Reserve Bank.  There isn’t anything for current Reserve Bank management to be proud of.

One of the reforms the new government is promising is the addition of some sort of employment objective (non-numerical) to the Bank’s statutory monetary policy responsibilities.  We don’t know the details, and probably neither does the Bank –  The Treasury was accepting submissions on that point right up to today – but I presume we will get a hint when the Policy Targets Agreement with the new Governor (under existing legislation) is signed and released next month.   But it is an obvious area of interest and apparently McDermott was asked some questions about the new environment.   You may recall that in the MPS the Bank released, for the first time, an estimate of the NAIRU (the estimated rate of unemployment at which there is neither upward nor downward pressure on inflation from the labour market) – “released”, but in a footnote (repeated in the press conference), citing analysis in an as-yet-unpublished research paper.

My reader reports that McDermott was asked about this, including

whether their estimate of NAIRU came about as a result of the likely addition of an employment mandate to the PTA, and … how they went about coming up with that number. His initial reply was “I’ve got a lot of very smart people working for me” and then he went on to basically say that the analysis and maths involved are too complicated for us to understand. He also highlighted, to the point of seeming rather proud of, the fact his team had decided to come up with the estimate on their own accord without any suggestion from him. It didn’t seem to me that even he knew how they  came up with 4.7%, nor that he particularly cared much.

The final sentence is clearly editorial in nature, and may or may not represent McDermott’s actual view, although it was clearly how he came across to this particular member of his audience.     As for the rest, when you put out a number in a footnote, don’t simultaneously make available the workings and background research, fall back on “very smart” staff,  and won’t even attempt to explain the intuition of the work that has been done, it isn’t a particularly good look from a senior public servant.    (I’ve also heard that in fact the “acting Governor” had been all over staff, as a matter of urgency, to produce publishable estimates of the NAIRU.)

I’m still looking forward to seeing the research paper when they finally get round to publishing it.  Perhaps the 4.7 per cent estimate of the NAIRU (with confidence bands) will prove to be robust, although it seems implausibly high to me.  But it is worth remembering that the Bank has form when it comes to rushing out new labour market indicators in high profile documents endorsed by senior managers, that play down any notion of ongoing excess capacity, without having first adequately road-tested and socialised the background research.    Persevering readers may recall the saga of LUCI , touted a couple of years ago by a Deputy Governor as the latest great thing, allegedly demonstrating that the labour market was already at or beyond capacity (and at least in that case the associated Analytical Note had already been published), before the interpretation of the whole indicator was quietly changed, and then it disappeared from view.

The questioner of McDermott apparently continued and

….suggested NAIRU will presumably become a more important consideration for the Bank going forward if they are handed a ‘full-employment’ mandate but he didn’t really address that question and instead spent 5 minutes explaining why it would need to be the Bank, and not politicians, who define what full-employment means at any given time, a suggestion I wasn’t aware anyone had made otherwise. He pressed the point that he didn’t believe the change to the mandate would make any difference whatsoever and sarcastically pointed out that they already consider employment when making decisions.

Since neither we, nor McDermott, has seen the new mandate, and since the new Governor (not yet in office) will be the single legal decisionmaker for a time, and then the new statutory Monetary Policy Committee will take responsibility, it isn’t clear how or why McDermott thinks he can say with any confidence that a new mandate won’t make any difference to policy.  Perhaps he wishes it to be so, but then he has been one of key figures in the regime of the last six-plus years that has delivered core inflation consistently below target even while (even on their own estimates) the unemployment rate has been above the NAIRU for almost the whole of that time.     As reported, it didn’t seem a very politically shrewd answer either –  it is one thing to emphasise that (as everyone agrees) in the long-run monetary policy can only influence nominal things (price levels, inflation rates etc), and quite another to suggest that there aren’t legitimately different short-run reaction functions.

We deserve better from our operationally independent central bank. Lifting the quality, and authority, of the Bank’s work around monetary policy will be one of the challenges for the new Governor, and needs to be borne in mind too by those devising the details of the new Reserve Bank legislation.

The Reserve Bank’s case for minimal reform

In early December, the Reserve Bank’s briefing to the incoming Minister of Finance  (BIM) was released, as part of the general release by the new government of the set of BIMs.     I wrote about the Bank’s briefing, and in particular about the appendix they included on the governance and decisionmaking issues.  In a departure from the now-common practice of including nothing of substance in BIMs the (unlawful) “acting” Governor –  I think I’ve gone a whole month without using that description –  took the opportunity to make his case in writing for minimal reform.

The Bank indicated that the appendix was itself a summary of a fuller document that they would make available to the Minister on request.  So I lodged an Official Information Act request for the fuller document, which they have released in full to me today.     It is really the sort of document that should be included with the collection Treasury has made available as part of the current Treasury-led review of the Reserve Bank Act, but as it isn’t there, I thought I should make it available for anyone interested ( RBNZ Memo – Review of policy decision process 16 Oct 2017 (1) ).

The paper was written by a couple of Reserve Bank managers –  Roger Perry, who manages a monetary policy analysis team, and Bernard Hodgetts who head the macrofinancial stability area –  and is dated 16 October, a few days before it became clear who would form the next government.   The paper itself is not described as Bank policy, but in the release I got today it is stated that

Please be aware that the document encapsulates Reserve Bank thinking at the time it was prepared.

Which suggests that at time it did represent an official view –  probably workshopped with senior management before the completed version we now have.     There is a pretty strong tone to the document suggesting that the authors did not expect a change a government (with only a couple of footnote references to possible implications of Labour Party policy positions in this area).

But, frankly, I was surprised how weak, and self-serving, the document was.  The Reserve Bank has been doing work on these issues off and on for several years –  there was the secretive bid a few years ago by Graeme Wheeler to get his Governing Committee enshrined in statute –  and yet there was little evidence of any particularly deep thought, and no sign of any self-awareness or self-criticism (over 30 years was there really nothing the authors –  or Bank –  could identify as not having worked well?).

There was also, surprisingly, no sign of any engagement with the analysis or recommendations of the Rennie report.  It is hard to believe that a report, on Reserve Bank governance issues, completed months earlier had not been shown to the Reserve Bank itself.   There was no substantive engagement with the models adopted in various countries that we tend to be closest too, or which are generally regarded as world-leaders in the field (by contrast, several references to the Armenian model –  to which my reaction was mostly “who cares”).    There was no reference at all to how Crown entities are typically governed in New Zealand –  that omission isn’t that surprising, given the Bank’s track record, but it should be (the Bank is after all just another government agency).  There wasn’t even any reference to how other economic and financial regulatory agencies in New Zealand are governed, even though the Financial Markets Authority is a new creation with a markedly different (but more conventional Crown entity) governance and decisionmaking model.

For what it is worth, on 16 October, the Bank seemed to favour:

  • enshrining the idea of the Governing Committee in law, but perhaps with slightly different versions of membership for monetary policy and financial stability functions,
  • legal decisionmaking power continuing to rest with the Governor,
  • the Governor’s appointment continuing to be largely controlled by the Board,
  • no publication of minutes or votes,
  • no external members of the committee(s).

But they make no serious attempt at critical analysis to support their case, let alone to engage with the risks of a system in which a single decisionmaker is key, and where that single decisionmaker is the boss of the other members of (what is really just) an advisory committee.   Or the anomalous nature of such a system in the New Zealand system of government, where even elected individuals rarely have such unconstrained authority, where committee-decisions are the norm (from Cabinet, the higher courts, through major Crown entities to school Boards of Trustees) and where Cabinet ministers (or Cabinet collectively) typically have the key role in appointing those who exercise considerable statutory powers.

The management of a central bank that can’t come up with better analysis than this really makes it own case for change –  legislative change, personnel change, and cultural change.

The Reserve Bank and housing collapses

In early December, the Reserve Bank published a Bulletin article, “House price collapses: policy responses and lessons learned”.  The article wasn’t by a Reserve Bank staffer –  it was written by a contractor (ex Treasury and IMF) –  but Bulletin articles speak for the Bank itself, they aren’t disclaimed as just the views of the author.   Given the subject matter, I’m sure this one would have had a lot of internal scrutiny.  Or perhaps I’ll rephrase, it certainly should have had a lot of scrutiny, but the substance of the article raises considerable doubt as to whether anyone senior thought hard about what they were publishing in the Reserve Bank’s name.

I’ve only just got round to reading the article and was frankly a bit stunned at how weak it was.    Perhaps that helps explain why it appears to have had no material media coverage at all.

The article begins with the claim that

This article considers several episodes of house price collapses around the globe over the past 30 years

In fact, it looks at none of these in any depth, and readers would have to know quite a bit about what was going on in each of these countries to be able to evaluate much of the story-telling and policy lessons the author presents.

Too much of the Reserve Bank’s writing about house prices tends to present substantial house price falls as exogenous, almost random, events: a country just happened to get unlucky.  But house prices booms –  or busts –  don’t take place in a vacuum.  They are the result of a set of circumstances, choices and policies.

And none of the Reserve Bank’s writings on housing markets ever takes any account of the information on the experiences of countries which didn’t experience nasty housing busts.  Partly as a result they tend to treat (or suggest that we should treat) all house price booms as the same.  And yet, for example,  New Zealand, Australia, the UK and Norway all had big credit and housing booms in the years leading up to 2008 but –  unlike the US or Ireland –  didn’t see a housing bust.  What do we learn from that difference?   The Reserve Bank seems totally uninterested.   Their approach seems to be, if the bust hasn’t already happened it is only a matter of time, but 2018 is a decade on from 2008.

One particular policy difference they often seek to ignore is the choice between fixed and floating exchange rates.  When you fix your exchange rate to that of another country, your interest rates are largely set by conditions in the other country.  If economic conditions in your country and the other country are consistently similar that might work out just fine.  If not, then you can have a tiger by the tail.  Ireland, for example, in the 00s probably needed something nearer New Zealand interest rates, but chose a currency regime that gave it interest rates appropriate to France/Germany.    Perhaps not surprisingly, things went badly wrong.

In the Bulletin article, the Bank presents a chart showing “house price falls in [10 OECD] selected crisis episodes” (surprisingly, not including Ireland).  But of those, eight were examples of fixed exchange rate countries (in several cases, the associated crisis led the country concerned to move to a floating exchange rate).   The same goes for all the Asian countries the author mentions in the context of the 1990s Asian financial crisis.     There can be advantages to fixing the exchange rate, but the ability to cope with idiosyncratic national shocks in not one of them.     And yet in the ten lessons the author draws in the article, there is no hint of the advantages of a floating exchange rate, in limiting the probability of a build-up of risk, and then in managing any busts that do arise.    It is a huge omission.  As a reminder, New Zealand, Australia, Norway, the UK, and Canada –  the latter a country that has never had a systemic financial crisis –  were all floating exchange rate countries during the 2000s boom and the subsequent recession/recovery period.

The author also hardly seems to recognise that even if house prices fall, house prices may not be the main event.   Even the Reserve Bank has previously, perhaps somewhat reluctantly, acknowledged the Norges Bank observation that housing loan losses have only rarely played a major role in systemic financial crises.   But there is no hint of that in this article.     Thus, in the severe post-liberalisation crises in the Nordics in the late 1980s and early 1990s, house prices certainly went up a lot and fell back a lot too, but most accounts suggest that those developments were pretty marginal relative to the boom and bust in commercial property, in particular development lending.  The same story seems to have been true for Ireland in the crisis there a decade ago.  Housing also wasn’t the main event in Iceland –  a floating exchange rate country not mentioned here that did have a crisis.  Even of the two floating exchange rate countries the article mentions –  Japan and the United States –  only in the United States could housing lending, and the housing market, be considered anything like the main event (and the US experience may not generalise given the very heavy role the state has historically played in the US housing finance market).

(And as I’ve noted here before,  even the US experience needs rather more critical reflection than it often receives: the path of the US economy in the decade since 2007 wasn’t much different to that of, say, New Zealand and New Zealand experienced no housing bust at all.)

Some of the other omissions from the article are also notable.  The author seems quite uneasy, perhaps even disapproving, about low global interest rates (without ever mentioning that inflation has remained persistently low), but there is no hint in the entire article that neutral interest rates may have been falling, or that global trend productivity growth may have been weak (weakening before the 2008/09 crisis showed up).   Thus, where economic activity is now –  10 years on –  may have little or nothing to do with the specifics of housing market adjustments a decade ago.   And although he highlights the limits of conventional monetary policy in many countries (interest rates around or just below zero), again he doesn’t draw any lessons about the possible need for policymakers to give themselves more room to cope with future downturns (by, for example, easing or removing the technological/legislative constraints that give rise to the near-zero lower bound in the first place.)

It is also remarkable that in an article on housing market collapses, there is only one mention of the possible role of land use restrictions in giving rise to sharp increases in house prices in the first place.   And then it is a rather misguided bureaucrats’ response: because supply may eventually catch up with demand the public need wise officials to encourage them to think long-term.  Perhaps the officials and politicians might be better off concentrating their energies on doing less harm in the first place –  whether fixing exchange rates in ways that give rise to large scale misallocation of resources, or avoiding land use restrictions that mean demand pressures substantially translate in higher land and house prices.

But in all the lessons the Bank (and the author) draw in the article, not one seems to be about the limitations of policy and of regulators.   There are typical references to short-termism in markets – although your typical Lehmans employee had more personal financial incentive (deferred remuneration tied up in shares that couldn’t be sold) to see the firm survive for the following five years –  than a typical central bank regulator does, but none about incentives as they face regulators and politicians (including that in extreme booms, an “insanity” can take hold almost everywhere, and even if there were a very cautious regulatory body, the head of such a body would struggle to be reappointed).

And nor is there any sense, anywhere in the article, as to when cautionary advice might, and might not, look sensible.  Alan Greenspan worried aloud about irrational exuberance years before the NASDAQ/tech bust –  someone heading his concerns then and staying out of the market subsequently would probably have ended up worse off than otherwise.   Much the same surely goes for housing.  In New Zealand, central bankers have been anguishing about house prices for decades.  Even if at some point in the next decade, New Zealand house prices fall 50 per cent and stay down –  the combination being exceedingly unlikely, based on historical experience of floating exchange rate countries, unless there is full scale land use deregulation –  that might not be much encouragement to someone who responded to Reserve Bank concerns 20 years ago.  (Oh, and repeated Reserve Bank stress tests suggest that even in a severe adverse economic shock of the sort that might trigger such a fall, our banks would come through in pretty good shape.)

The article concludes “housing market crashes are costly”.    Perhaps, but even that seems far too much of a reduced-form conclusion.  The misallocations of real resources that are associated with housing and credit booms are likely to be costly: misallocations generally are, and often it is the initial misallocation (rather than the inevitable sorting out process) that is the problem.  To me, it looks like an argument for avoiding policy choices that give rise to major misallocations (and all the associated spending) in the first place: be it fixed exchange rates (Nordics or Ireland), land use restrictions (New Zealand and other countries), or state-guided preferential lending (as in the United States).   Of the three classes, perhaps land use restrictions are most distortionary longer-term, and yet least prone to financial crises and corrections, since there are no market forces which eventually compel an adjustment.

It was a disappointing article on an important topic, sadly all too much in the spirit of a lot (but not all) of the Reserve Bank’s pronouncements on housing in recent years.

On housing, in late November, the Minister of Housing Phil Twyford commissioned an independent report on the New Zealand housing situation.   According to the Minister

“This report will provide an authoritative picture of the state of housing in New Zealand today, drawing on the best data available.

The report was to be done before Christmas and it is now 15 January.  Surely it is about time for it to be released?

OIA obstructionism – yet more evidence for RB reform

Working my way through things that turned up while I was away, I stumbled on an impressive piece of public sector diligence.  At 3.44pm on the last working before Christmas – a time by which surely most office-bound workers had already left work for the holidays –  Angus Barclay, from the Communications Department of the Reserve Bank, responded to an Official Information Act request I’d lodged with the Bank’s Board several weeks earlier.   I was impressed that Angus had still been at work, but was less impressed with the substance of the response.

I’d asked the Board for copies of the minutes of meetings of the full Board and any Board committees in the second half of last year (specifically 1 July to 30 November).  It didn’t seem likely to be an onerous request: there would probably only have been four or five full Board meetings, and perhaps some committee minutes, all of which will have been readily accessible (in other words virtually no time all in search or compilation).    Perhaps the Board would have wanted to withhold some material, and (subject to the statutory grounds) that would have been fine.  But again, doing so shouldn’t have been onerous.   The Board, after all, exists mostly to monitor the performance of the Governor, on behalf of the public.   In an open society, it isn’t naturally the sort of material one should expect to be kept secret.

In fact, in the 22 December response I received I was informed that there were only five documents.  But I couldn’t have them.  Instead, the request was extended for almost another two months, with a new deadline of 19 February.   Oh, and they foreshadowed that they would probably want to charge me for whatever they might eventually choose to release.

Why was I asking?     After an earlier request to the Board, around the appointment of an “acting Governor”, it had come to light that there was no documentation at all around the process for the appointment of a new Governor (that had been underway in 2016, before Steven Joyce told them to stop), which in turn appeared to be a clear violation of the Public Records Act.    The process of selecting a candidate to be the new Governor is one of the Board’s single most important powers.   And yet the records showed that nothing had been documented –  to be clear (see earlier post), it wasn’t that material was withheld (for which there might well have been an arguable case), it just didn’t exist.   Following that post in May, I was interested to see whether the Board had sharpened up its act, and come into compliance with its statutory obligations.

I had some other interests, of course.   For example, in the five months covered by my request, Graeme Wheeler had finished his term, and I also wondered if there might be some insight in the minutes on the still-secret Rennie review on the governance of the Reserve Bank.

But instead I met obstruction.

There are two things that interest me about the response.  The first is that, although the request was explicitly made of the Reserve Bank Board –  which has a separate statutory existence, and whose prime function is to hold the Bank/Governor to account –  the response came from Reserve Bank staff, referencing only Reserve Bank policies and practices.  It is consistent with my longstanding claim that the Board has allowed itself to simply serve the interests of, and identify with, the Bank –  rather than, say, the Minister who appointed them, or they public whom they (ultimately) serve.

Thus, in respect of the charging threat, I received this line

The Ombudsman states on page 4 of the guidelines on charging that: “It may also be relevant to consider the requester’s recent conduct. If the requester has previously made a large volume of time-consuming requests to an agency, it may be reasonable to start charging in order to recover some of the costs associated with meeting further requests.”

I’m not precisely sure how many OIA requests I lodged with the Board last year, but I’m pretty sure it was no more than four (and one of those was to secure material that was in fact covered by, but ignored in the answer to, an earlier request).   Three of the four I can recall were simply requests for copies of minutes – with no substantial search or collation costs.  Given the uncertainty around the legality of the appointment of the “acting Governor”, major events during the year such as the Rennie review, questions around compliance with the Public Records Act, and the process of selecting a new Governor, it didn’t seem like an undue burden on the Board.

As the Ombudsman’s charging guidelines also note

Note, however, that some requesters (for example, MPs and members of the news media), may have good reasons for making frequent requests for official information, and they should not be penalised for doing so.

Since this blog is one of the main vehicles through which a powerful public agency –  Bank and/or Board –  is challenged and scrutinised, I’d say I was on pretty strong ground in my request for straightforward Board minutes.  (And just to check that the Board itself isn’t being overwhelmed with other requests, I lodged a simple further request this morning asking how many OIA requests the Board has received in each of the last two years, and copies of the Board’s procedures of handling OIA requests made of it.)

I can only assume that the Bank itself, which seems to be controllling the handling of requests made even to the Board, has gotten rather annoyed with me again, and decided to use the threat of charging as some sort of penalty or deterrent.  Longstanding readers may recall that we have been this way once before.  About two years ago, the Bank got very annoyed with me (and some other requesters) and started talking of charging left, right and centre.   Reaction wasn’t very favourable, and Deputy Governor Geoff Bascand even took to the newspapers with an op-ed defending the Bank’s stance.   There was talk of a “mushrooming” number of requests, but on closer examination even that didn’t really stack up –  the number of OIA requests the Bank received was much smaller than, say, those The Treasury received.     Explaining is (often) losing, and as I noted at the time, the Bank didn’t come out of the episode well.   As a refresher, the Bank released responses to 20 OIA requests in 2017.  The Treasury, by contrast, released responses to more than 80 OIA requests (in both agencies there will be have responses not posted on the respective websites).

But even in their defence a couple of years ago, Bascand asserted that the Bank –  no mention of the Board –  would be charging only when the requests were “large, complex or frequent”.  My latest request of the Board is neither large nor complex, and neither were the earlier requests.

Even though the Bank and the Board are not the same entities, they are clearly trying to conflate my requests to both entities.   But over the course of last year, my records suggest I lodged no requests at all with the Reserve Bank itself in the first five months of last year.    Between June and the end of the year, there seem to have been quite a few, but on topics as diverse as:

  • the new “PTA” signed by Steven Joyce and Grant Spencer,
  • the Toplis suppression affair,
  • assumptions about new government policies the Bank referred to in its latest MPS,
  • some data from an expectations survey that the Bank had not published
  • three old papers, each clearly-identified in the request,
  • a specific paper on RB governance issues explicitly mentioned in the Bank’s BIM, and
  • work on digital currencies that the Bank explicitly highlighted in a recent research paper.

All still seem like reasonable requests, of a powerful agency which has a wide range of functions.  It seems unlikely that many of them should have involved any material amount of time to search for, or collate (in fact, in response to several requests the Bank responded quite quickly and in full, prompting notes of thanks from me).   There are no requests that can reasonably be described as “fishing expeditions”, and no pattern of repeated requests for much the same information.  They seem like the sort of requests those who devised the Official Information Act might have had in mind.

Finally, it is worth noting what the Ombudsman’s guidelines suggest can and can’t be charged for (bearing in mind that very few agencies charge at all).    Agencies can, in appropriate circumstances, charge for things like

Search and retrieval 

Collation (bringing together the information at issue) 

Research (reading and reviewing to identify the information at issue) 

Editing (the physical task of excising or redacting withheld information) 

Scanning or copying

Five nicely-filed documents (Board minutes) will have taken mere minutes to retrieve, no time to copy (since they will exist in electronic form already) and no time to research.  It is conceivable that the physical task of redacting withheld information might take a little time –  but very little.

And what can’t agencies charge for at all?

Work required to decide whether to grant the request in whole or part, including:
– reading and reviewing to decide on withholding or release;

– seeking legal advice to decide on withholding or release;

– consultation to decide on withholding or release; and – peer review of the decision to withhold or release. 

Work required to decide whether to charge and if so, how much, including estimating the charge.

If the Reserve Bank or the Board think that trying to charge for five simple, easily accessible, documents is consistent with the principles of the Official Information Act, or of the sort of transparency they often like to boast of, things are even worse than I’d supposed.   And in the attempt, they will again damage their own image and reputation more than they inconvenience me.

If anything, it is further evidence of why a full overall of the Reserve Bank Act –  and of the institution –  is required.  You might have supposed that, with a review underway, the Bank and the Board would have wanted to go out of their way to attempt to demonstrate that there were no problems, no issues, in an attempt to convince the Minister to make only minimal changes, leaving incumbents with as much power and control over information as possible.  But no, instead by the words and actions they simply reinforce the case for reform, and indicate that they have little concept of what genuine public accountability means.   We should be looking for openness, not obtuseness and obstructiveness from the Bank –  whether the Governor (“acting” or permanent) or the Board, supposedly operating on our behalf to keep the Bank in check.  Once again, we don’t see what we should have the right to expect.

Perhaps, on reflection, the Bank or the Board will reconsider their wish to charge for some simple documents –  the sort of documents that should probably be pro-actively released as a matter of course.  If not, one can only assume they have something to hide.   The “good governance” former public servant in me is sufficiently disquieted about the evidence of weak or non-existent recordkeeping that I am thinking of taking further the apparent breach of the Public Records Act.  Options might include:

  • a letter to the chair of the Board, asking how the Board is assured that it is operating in compliance with the Act,
  • a letter to the Minister of Finance, asking whether (and how) he can be sure that his appointees (the Board) are operating in compliance, given past evidence of major gaps,
  • a letter to the minister responsible for the Public Records Act itself,
  • a letter to the Auditor-General expressing concerns about the evidence suggesting that the Board of the Reserve Bank is not meeting its statutory obligations under the Public Records Act.


Adrian Orr as Governor-designate

There are some good aspects in the announcement yesterday that the government intends to appoint Adrian Orr as the next Governor of the Reserve Bank.

For a start, the appointment will be a lawful one –  always a help.  Steven Joyce’s unlawful appointee as “acting Governor” will continue to mind the store until late March, and then at least we will be back to having someone lawful in office.   The unlawful interlude was unnecessary, and reflects poorly on governance and policymaking in New Zealand, but it will be soon be over.  Be thankful for small mercies.

It also seems highly unlikely that Adrian Orr will spend his first five years in office skulking in corners, avoiding any serious media scrutiny.   He is a vigorous and, mostly, effective communicator (on which more below) and in that sense is likely to be a welcome breath of fresh air in the Reserve Bank.  If he can model greater openness, across all the Bank’s function, it would be a significant step forward.

And there might be reason to hope that an Orr-led Reserve Bank might start to take transparency –  within and beyond the confines of the Official Information Act –  rather more seriously.  I’m not a huge fan of the New Zealand Superannuation Fund, but I am quite impressed by their transparency, including in dealing with Official Information Act requests.  When I asked recently for the background papers justifying the decision to cut the Fund’s carbon exposures –  they’d already pro-actively released some papers –  I got (from memory) something like 3000 pages of material.  When one asks the Reserve Bank for background papers to monetary policy decisions, one is repeatedly stonewalled (unless it is about things from 10 years ago).  I hope the contrast bodes well for the sort of leadership Adrian will bring to the Bank.

That is the positive side of the appointment.  But here is what I wrote earlier in the year, at the time when controversy was raging about his NZSF salary.

Orr simply isn’t –  and I wouldn’t have thought he’d claim otherwise –  some investment guru, blessed with extraordinary insights into markets, prospective returns etc etc.  He was a capable economist, and a good communicator (at least when he doesn’t lapse into vulgarity), who turned himself into a manager and seems to have done quite well at that.   He always seeemed skilled at managing upwards, and his management style (in my observation at the Reserve Bank) seemed to err towards the polarising (“are you with us, or against us”), attracting and retaining loyalists, but not exactly encouraging diversity of perspectives or styles.  He isn’t exactly a self-effacing character. (That is one reason I’m not convinced he is quite the right person to be the next Governor of the Reserve Bank.)

I’d stand by those comments today.

He is more of a manager –  and perhaps a salesperson – than an economist, despite some comments in the last day about him being an “exceptional economist”.  That has probably been so for at least 20 years now.  In itself, that isn’t a criticism, and there is a significant management dimension to the Reserve Bank role –  in particular, at present, a change management responsibility (both to implement whatever changes emerge from the Minister of Finance’s secretive review of the Reserve Bank Act, and to lift the internal performance, and improve the culture, of the Bank).

His management approach might be more questionable. In his first short stint at the Reserve Bank, 20 years ago, he took over a department that was severely demoralised and lacking the influence it would normally have had.  In a narrow sense, he did an effective job of turning around that underperformance.   But his style always seemed to be quite a divisive one, playing up “his team” at the expense of others, rather than seeking to lift the entire organisation  –  in fact, he boasted of it in his farewell speech when he left the Bank in 2000.  I haven’t observed him directly in the last decade, but I am struck by the number of able people I’ve known who’ve worked for him for a time, and then didn’t.    It wasn’t, as far as I could see, that they went on to bigger and better things either.  Adrian seems to build cohesive teams of loyalists.  That has its place, but it isn’t obvious that the Reserve Bank is one of those places.

What of his communications skills?  He can be hugely entertaining, and quite remarkably vulgar (an astonishingly crude analogy involving toothbrushes springs to mind).   Just the thing –  perhaps –  in an old-fashioned market economist.  Not, perhaps, the sort of thing we might hope for from a Reserve Bank Governor.   Financial markets can get rather precious about very slight changes in phrasing etc from the Reserve Bank, and it is hard to be confident just how well Orr will go down.  No doubt he will rein in his tongue most of the time –  and perhaps he has calmed down a bit with age – but it is the exceptions that are likely to prove problematic.

And what happens when some journalist or market economist riles him?    Perhaps a journalist might ask him about how he would approach an episode like the Toplis affair?  You (and I) might like to hope things would be different, but I have in mind an episode from Orr’s time as Deputy Governor.  A visiting economist was engaging in what they thought was a bit of robust dialogue with Orr in a meeting with several people at the Bank.  Shortly afterwards, Orr bailed the visitor up in the street and told him ‘never, ever, do that in front of my staff again”.

And yet, so we are told, part of the motivation for the forthcoming reforms to the Reserve Bank is to ensure that more perspectives are heard, and incorporated, in decisionmaking at the Bank.   How confident can we be that Orr will actually implement the reforms in a way that will foster debate and diversity, rather than clamp down on it and marginalise anyone he perceives as disagreeing with him?   Particularly if the person or people disagreeing with them doesn’t share his blokish style, or might simply know more about a particular issue than Orr does.

And how is Orr going to do –  repeatedly in the public eye, in a way he hasn’t been for the last decade –  with the sort of gravitas and political neutrality the role of Governor requires?  Only a few weeks ago – when he must already have known that he was likely to become Governor –  Orr gave a speech to the Institute of Directors, in which he reportedly dismissed the views of Deputy Prime Minister on the economy as “bollocks” and went on to suggest, in answer to a question about nuclear risks in North Korea, that perhaps two issues could be solved at once ‘because Winston is going to North Korea”.  Recall that at the time, Orr was not some independent market economist, but a senior public servant.     He might well have been right in his views on the economy, but is this how senior public servants should be operating?

I also have concerns about the way Orr engages with issues and evidence. My very first dealing with him involved some controversial reform proposals we were working on at the Bank, while Adrian was still in the private sector.   Adrian’s submission had played rather fast and loose with the data, something I pointed out to Don Brash, the then Governor.  Don went rather quiet and didn’t say much, which puzzled me a little, until a day or two later Adrian’s appointment as Reserve Bank chief economist was announced.  Much more recently, there was some debate earlier in the year about NZSF’s performance.   On a good day, and in official documents, Adrian will happily tell you NZSF’s performance can only really be judged over, say, 20 or 30 years horizons.  But then he will pop up in the newspaper suggesting that a few moderately good years –  amid a global asset market boom –  vindicate the existence of the Fund and the way it is run.    He keeps trying to convince us that he runs  a “sovereign wealth fund”, when it fact it is a speculative punt on world markets, using borrowed money (yours and mine).  He has simply refused to engage with the international evidence casting doubt on whether active funds management can generate positive expected returns in the long-run, and when he led the NZSF into a big (politically popular, but economically questionable) move out of carbon exposures –  an active management call if ever there was one – he took steps to ensure that taxpayers couldn’t really know whether his judgement paid off (hiding the change in the benchmark itself, rather than being constantly reported in devations from a benchmark).     I’m just not sure it is quite the degree of rigour, authority and independence of mind that we should be looking for in a Reserve Bank Governor.  What example, for a start, does it set for his own subordinates in how they marshall evidence and arguments for him?

On the same note, there was that speech Orr gave last month to the Institute of Directors (full text here).  It was given at a time when he knew he was in the final stages of the gubernatorial selection process.   It was advertised as a substantial speech

Looking Beyond Our Shores – Adrian Orr’s Address to the Institute of Directors

Adrian Orr’s address to the Institute of Directors, Wellington, 16 November 2017.
Adrian shares his thoughts on what directors need to think about to make sure New Zealand benefits from its place in the globalised economy.

So you might have expected some considerable substantive analysis.   But there wasn’t much there at all.     You won’t find anything about New Zealand’s underperformance –  productivity, exports, or whatever.   But you will find one conventional wisdom thought after another (albeit with a tantalising aside on Chinese influence), whether or not they apply to New Zealand  (eg “returns to the owners of capital versus labour –  which is stretched to extremes at present within and between nations” –  when the labour share of income has been rising in New Zealand for 15 years).  And then it devolves to “doing something” about climate change –  which might or might not be sound, but isn’t going to make us materially better off – and lots of self-praise (not all of it even accurate) for the NZSF.    A speech on how to “make sure New Zealands benefits from its place in the globalised economy” ends with these platitudes

My summary thoughts are:

  • Companies must take more long-term ownership of all their activities – it is the Board’s role; 
  • New Zealand needs to embrace a global reputation of longtermism, and sell it; and
  • We can start with climate and our culture at the company level.

No real answers, and not much depth there.   Perhaps it wasn’t characteristic –  I haven’t gone back and read his other speeches from recent years –  but this was the speech on a topic somewhat closer to his new areas of responsibility as a (singlehanded) key economic decisionmaker.

I’m sure there are those capable people who are genuinely impressed with Adrian (as presumably, the Reserve Bank Board was –  the same people who appointed Graeme Wheeler).  But don’t be fooled by the absence of any sceptical comment at all in the last day or so.     Of the people the media is likely to go to for comment, many will be needing to maintain a professional relationship with him in his new role, and others will work for organisations that do business with NZSF –  and Orr is still chief executive there for a few more months.

Only time will now tell how Orr does in the job.   For a time he will be by far the most powerful unelected person in New Zealand –  exercising singlehandedly all the monetary policy, regulatory, and intervention powers the various Acts give to the Governor –  and then and beyond responsible for leading the transition to a reformed Reserve Bank (details of which are still unknown –  including how much effective power will be left with the Governor).  As someone who is well-known to fight for his patch, his people, I’ve further revised down my estimate of the prospects for real change at the Bank –  especially around the financial stability functions where (a) the Bank is almost lawless, and (b) the Minister of Finance doesn’t care very much.  I’d like to believe he will do well –  for the New Zealand public –  but it is hard not to shake the impression that Adrian Orr is no Phil Lowe (RBA), Stephen Poloz (Bank of Canada), Philip Lane (central bank of Ireland), Stan Fischer (former central bank of Israel and recent vice-chair of the Fed).   In some ways he will be very different from Graeme Wheeler, but in many areas we could be exchanging one set of weaknesses for another.

But I suspect he will be wildly popular at the annual financial markets function the Reserve Bank hosts.   Bonhomie, backslapping, and plenty to drink tended to characterise those functions when I had to attend them.



Two BIMs and a bureaucrat

As I noted last week, government departments’ (and agencies’) briefings to incoming ministers have mostly become a bit of a joke: mostly devoid of any substance, typically specifically tailored to the preferences of the particular incoming government (ie written/finalised after the shape of the new government is clear), and mostly not much more than process pieces.  If one is interested in the actual substantive advice –  the sort of things the Lange government intended to make available when they began publishing BIMs in the mid 1980s –  citizens need to fall back on the Official Information Act, with all its limitations.

There are exceptions –  I wrote the other day about some substance in the Reserve Bank’s BIM.   And even on the little that is released, sometimes tantalising hints sneak through.  The intelligence services, for example, left unredacted a suggestion that governments might need to be concerned about the influence activities in New Zealand of foreign governments –  something neither the current Prime Minister nor her predecessor have been willing to take seriously or address openly.

Of the other economic functions, neither the Treasury nor the Immigration BIMs say much.  But sometimes there is quite a bit even in a few words.  Take immigration for example.    It was only a few years ago that MBIE was telling Ministers of Immigration (and the public) that immigration was a “critical economic enabler” –  a potential catalyst to transform New Zealand’s dismal productivity performance.   There isn’t much in this year’s Immigration portfolio BIM –  mostly process again –  but my eye lit on this paragraph

New Zealand’s immigration system enables migrants to visit, work, study, invest, and live in New Zealand. Economically, it contributes to filling skill shortages, encouraging investment, enabling and supporting innovation and growing export markets. Immigration has contributed to New Zealand’s strong overall GDP growth in recent years largely through its contribution to population growth. However, the evidence suggests that the contribution of immigration to per capita growth and productivity is likely to be relatively modest.

The theory –  dodgy bits like “filling skill shortages” and the more plausible bits –  is there in the first half of the paragraph.  But by the end of the paragraph, even MBIE has to concede that there isn’t likely to be much boost to per capita income or productivity at all –  the effects are “likely to be relatively modest”.  It is hard to avoid that sort of conclusion –  looking specifically at the New Zealand experience –  when (to take MBIE’s list from the second sentence) “skill shortages” have been a story told in New Zealand for 150 years, business investment has been weak by OECD standards for decades, firms haven’t regarded it as particularly attractive to invest heavily in innovation (again by world standards), and the export share of GDP is now at its lowest since 1976.  Still, it is good to see reality slowing dawning on MBIE.  On my telling, they are still too optimistic, but even on their telling when such a large scale policy intervention seems to produce such modest economic results it might be time for a rethink.

And what about the BIMs prepared by Treasury?   There isn’t much in the main Finance document (lots of process stuff, and plenty of talk of diversity and wellbeing and none on productivity).  There is an appendix specifically aimed to address what Treasury understand to be the new Minister’s priorities, but not much about Treasury’s own view of what needs to be done, or the pressing problems.    If anything, reading Gabs Makhlouf’s covering letter to Grant Robertson one might conclude that Treasury didn’t think there was much to worry about at all.

You are taking up your role at a time when New Zealand’s economy is in a relatively strong position.  There is solid forecast growth, complemented by fiscal surpluses and a strong debt position.  And while international markets still present a number of risks and uncertainties, overall the global economy –  as reflected in the IMF’s recent outlook –  presents opportunities for New Zealand to seize, in particular with Asia’s ongoing growth.

Presumably the Secretary didn’t think it worth emphasising five years of no productivity growth, seventy years of pretty weak productivity growth, shrinking exports as a share of GDP, sky-high house/land prices, pretty weak business investment and so on.  Or even the fact that notwithstanding “Asia’s ongoing growth” –  a story now for more than forty years –  nothing has looked like turning around New Zealand’s continuing gradual economic decline.    And perhaps when you are a temporary immigrant yourself –  as Makhlouf presumably is –  the cumulative (net) loss of a million New Zealanders isn’t something that concerns you?

In their BIM Treasury proudly asserts that “We are the Government’s lead economic and financial adviser”.  Perhaps they hold that formal office, but it is hard to be optimistic about the content of what they might be offering the government.

But Treasury also had some other BIMs for other portfolios they have responsibilities for.  The one I noticed was the Infrastructure one.    Buried in the middle of that document was this observation

Auckland’s ability to absorb growth has been reached. Environmental, housing and transport indicators all reflect a city under increasing pressure. Traditionally, Auckland has been more productive than other regions of New Zealand but, on a per capita basis, this productivity premium has been shrinking over time. Auckland is not performing as well as expected for its size and in comparison to other primary cities around the world.  There are opportunities to increase this productivity but only if supply constraints, especially transport and housing, are resolved.

That key middle sentence –  no hint of which appears in the main Treasury BIM –  could easily have been lifted from one of my various posts on similar lines.    They could have illustrated the point with a chart like this.

akld failure


Appearing in the standalone Infrastructure BIM, Treasury appear to want to blame these poor outcomes largely on infrastructure gaps –  a conclusion which I think is flawed –  but I’m encouraged to see a recognition of the problem in official advice to the Minister of Finance.   It is all a far cry from the rather lightweight celebratory speech Gabs Makhlouf was giving about Auckland’s economy only 18 months ago, which I summed up this way

[it] might all sound fine,  until one starts to look for the evidence.  And there simply isn’t any.  Perhaps 25 years ago it was a plausible hypothesis for how things might work out if only we adopted the sort of policies that have been pursued. But after 25 years surely the Secretary to the Treasury can’t get away with simply repeating the rhetoric, offering no evidence, confronting no contrary indicators, all simply with the caveat that in “the long run” things will be fine and prosperous.  How many more generations does Makhouf think we should wait to see his preferred policies producing this “more prosperous New Zealand in the long run”?

If the Secretary to the Treasury was going to address the economic issues around Auckland, one might have hoped there would be at least passing reference to:

  • New Zealand’s continuing relative economic decline, despite the rapid growth in our largest city,
  • Auckland’s 15 year long relative decline (in GDP per capita), relative to the rest of New Zealand,
  • The contrast between that experience, and the typical experience abroad in which big city GDP per capita has been rising relative to that in the rest of the respective countries,
  • The failure of exports to increase as a share of GDP for 25 years,
  • The fact that few or any major export industries I’m aware of our centred in Auckland (the exception is probably the subsidized export education sector) –  and by “centred” I don’t mean where the corporate head office is, but where the centre of relevant economic activity is.

There is nothing of economic substance on immigration in the main Treasury BIM this year, but perhaps over the next few years Treasury could start thinking harder about whether it really makes sense to be using policy to bring ever more people to one of the most remote corners on earth, even as personal connections and supply chains seem to be becoming ever more important, at least in industries that aren’t simply based on natural resources.

The one other thing that did catch my eye in the Treasury BIM was this paragraph

The Treasury Board. This external advisory group supports the Treasury’s Secretary and ELT to ensure that its organisational strategy, capability and performance make the best possible contribution to the achievement of its goals. Current members of the Board are the Secretary to the Treasury (Gabriel Makhlouf), the Chief Operating Officer (Fiona Ross), Sir Ralph Norris, Whaimutu Dewes, Cathy Quinn, Mark Verbiest, Harlene Hayne and John Fraser (Secretary to the Australian Treasury).

Now, to be fair, the “Treasury Board” has no statutory existence, and no statutory powers.  It isn’t even clear why it exists at all –  Boards are typically supposed to represent shareholders, and as regards Treasury, the Minister of Finance, Parliament, and the SSC are supposed to do that on our behalf.  But given that there is an advisory Board, what is a senior public servant from another country  –  the Secretary to the Australian federal Treasury –  doing on it?      New Zealand and Australia might be two of the closer countries in the world, but we don’t always have the same interests, and at times those interests –  and perspectives – clash rather sharply.    I gather John Fraser is quite highly regarded, but who does he owe allegiance to, and whose interests is he advancing in his work on the New Zealand “Treasury Board”?  I might not worry if he were a retired former Treasury Secretary from Australia, but he is a serving official of the Australian government.  It seems extraordinary, and quite inappropriate.   Did he, for example, have any involvement in the recent, superficially questionable, appointment of a former senior Queensland public servant to a top position in our Treasury?    Again, close working relationships between the two Treasurys –  each as servants of their own governments –  might be reasonably expected, and perhaps mutually beneficial.   But providing a senior official of another government with inside access to the senior-level workings of one of our premier government departments seems questionable at best.  GIven Makhlouf’s past enthusiasm for China, perhaps the appeasers at the New Zealand China Council will soon be suggesting he appoint someone from China’s Ministry of Finance could join Fraser on the “Board”?

And finally, some kudos for a bureaucrat.  As various people have noted, Graeme Wheeler went for five years as Governor –  as the most powerful unelected person in New Zealand –  without ever exposing himself to a searching interview, or making himself available for an interview on either main TV channel’s weekend current affairs shows.  His appointment might be highly legally questionable, he might be only minding the store for a few months, but yesterday Grant Spencer went one better than Wheeler and sat down for interview on Q&A with Corin Dann.    I thought he did well, but what really counted was just showing up, and being open to questions.

Since much of the interview was about Spencer’s speech last week, which I’ve already written about, there was much in it that I disagreed with.  But I’m not going over that ground again.  Perhaps the one new thing that caught my attention was when Spencer claimed that the Bank is independent for monetary policy, but not around things like LVRs.   That is simply factually untrue.  The Act makes it very clear that any decisions to impose or lift LVR restrictions are solely a matter for the Governor (also a point that the Prime Minister, the Minister of Finance and their predecessors have recognised).   Spencer went on to say that if the then government had not wanted the Bank to impose LVR restrictions they wouldn’t have done so.     That might be fine, but I hope they never apply that standard to monetary policy decisions.  And if LVR decisions really are more political and redistributive in nature, perhaps as part of the forthcoming review, the Reserve Bank Act should be changed so that the Reserve Bank offers technical professional advice, but the Minister of Finance makes the decision?.  We can, after all, toss out elected governments.