CEOs, the PM, and the degraded state of the public sector

What do you think of when you think of a CEO of a large or prominent New Zealand entity?   Mostly, I think of a highly-paid confident political operator and virtue-signaller.

I’m sure there are exceptions (many of them will be the ones who consciously choose to kept a modest profile).  There will even be some hugely-impressive people who’ve created and built businesses that have made them and society as a whole better off.  Sadly –  marker of our long-term economic failure –  there aren’t many of them, at least among that “large or prominent” grouping.

But apparently I don’t really know what I’m thinking at all.   At least according to a bunch of highly-paid corporate bureaucrats (private and public).

I opened the Dominion-Post newspaper this morning to find a full page advert, half of it in Labour Party red, screaming “What does a CEO look like?”.   Well-dressed, highly paid, and scared of upsetting anyone was my first thought?

But I was wrong (at least according to this advert)

“Admit it. You pictured a white middle-aged male didn’t you.”

Well, no, I didn’t actually.  Of course, the majority of (big private business) CEOs in New Zealand probably are white, middle-aged, and male, but (conservative as I am) I try to view people on their merits, not their sex, skin colour, age, religion or whatever.  In passing one might note that most people in New Zealand are “white”, and mostly I’d expect heads of big and powerful agencies to be middle-aged (that loose label than can encompass anything from about 37 to 67 – although at least one 12 year old reader of the paper tells me 35 is really the starting point).

Ah, but really age has nothing to do with.  It is all about sex.

Could it be because every time we see a female CEO we still refer to her as a “female CEO”?

Speak for yourself, because I know I don’t.  Incompetence (and no doubt competence) knows no bounds of sex.

But apparently it is “indefensible”, this crime that the advertisers have convicted us –  the (overwhelmingly) liberal readers of the Dom-Post –  of, the more so

in a country where a mother in her late thirties is up there on the world stage being a pretty excellent Prime Minister

I guess advertisers are welcome to their opinion.  Personally, I view our current Prime Minister as proof that we have now reached the generally welcome stage in public life where a woman leader can be as useless and ineffectual as any man (Elizabeth I, Catherine the Great, Margaret Thatcher, and Golda Meir may well have been in days when a woman had to be markedly better to excel).

They go on, strangely, to describe the Prime Minister as “the CEO of New Zealand”, which is wrong both in law and in substance.  The government is not the country.  The “CEO of New Zealand” is invoked in support of their cause –  “ask her and she’ll tell you”.

And who is behind this advert?  Given the Labour Party colour and the slathering praise of the Prime Minister you might have assumed it was paid for by the Labour Party, or some front body.

But it wasn’t the Labour Party.  It was a group called Champions for Change.  When you look them up you find that they are a bunch of CEOs and board chairs (one was a chair until very recently when a High Court judgment against her saw her ousted), who also seem to have forgotten the name of the country (it isn’t called Aotearoa New Zealand).  There are 52 of them, about 30 per cent female and the rest male.   They represent (note the word –  these people aren’t here as individuals) 45 organisations (their logos bedeck the front page of the website).

If people in the private sector want to spend their money, or that of their shareholders, on praise of the Prime Minister –  a party political figure –  that is, of course, their choice.

But who is on this list of leaders?  Among them is

Gabs Makhlouf, Secretary to the Treasury

Mike Bush, Commissioner of Police

Peter Chrisp, Chief Executive of New Zealand Trade and Enterprise

and the Ministry for Women (CEO not pictured) is also a sponsor.

These people have clear responsibilities to be neutral public servants, not putting public money under their control into full-page adverts championing the Prime Minister personally.   There are State Services Commission guidelines around the political involvement of public servants, and if involvement in an advert like this doesn’t breach those standards, there is something very wrong with how the guidelines are written.    Among the key points of those guidelines

Very senior State servants, and those who have regular, direct contact with Ministers, or represent a public face of their agency should exercise careful judgement when considering involvement in political activities.

Judgement that seems to have been sorely lacking in this case.

These aren’t the only public sector people involved (although they are the clearest breaches of acceptable conduct).

We also have the CEO of Auckland Council (note the Labour mayor) and the chairs and chief executives of various SOEs (wholly state-owned) and majority Crown (or council)-owned companies.  That list includes New Zealand Post, Air New Zealand, Genesis Energy, Ports of Auckland, and Transpower.    You could add in a couple of a university senior managers as well, one of whom (Massey) must be very grateful to the Prime Minister for giving her cover in her little spot of bother last year.

I get that these individuals, and even their organisations, might want to bash the public around the ears and do their virtue-signalling, but they simply shouldn’t be using their office (and public resources) to champion the Prime Minister.  It is the sort of thing one expects in degraded semi-authoritarian states, not in New Zealand.  It should be totally unacceptable.

One other thing that was striking about the advert was that looking through the organisations these people represent there were (see above) lots of public sector agencies, government bodies, and Crown-owned businesses. There were plenty of local bosses for big overseas businesses.  There were people from really highly-regulated entities (looking at you banks), really quite dependent on government favour, and professional services firms –  dead keen on government contracts – likewise.  There wasn’t, as far as I could see, a single representative of a successful outward-oriented New Zealand business that had developed in the last 30 years (and, actually, only a couple of inward focused ones).

It was not a confidence-inducing sign that these people really had any idea how to build and lead a top-performing business in a genuinely competitive environment. But I guess they know how to keep on the right side of the Prime Minister.

As I say, private sector people can do or say (“get with the project peasants”) whatever their board and shareholders are happy with.  Public sector figures –  particularly the heads of such important agencies as the Police and The Treasury – need to get out, and stay out, of partisan political projects.  They need to called to order, but in the degraded state of modern New Zealand (isn’t Shane Jones still a senior minister?) you’d have to wonder who would actually do that.

(UPDATE: And I almost forgot to mention that the CEO of Stuff –  publishers of the Dominion-Post – is also part of the slathering praise of the Prime Minister.)

virtue

 

 

Foreign interference and deference to foreign powers

On Monday evening, the Australian ABC network broadcast its Four Corners current affairs show, with a feature slot (the link will take you to the video or to a full transcript) on what they describe as the PRC’s “covert political influence campaign in Australia”.

Somewhat corrupted as the system might be, they seem to take this stuff quite seriously in Australia: just this week, there have stories expressing concern about the Opposition leader attending the wedding of the daughter of a PRC billionaire (and donor) who was then a resident of Australia but has subsequently been stripped of his residency and right of return on security grounds.   And, around issues raised in the ABC programme, former Prime Minister Malcolm Turnbull has been out calling for action around claims that a Liberal minister had allowed preferential access to this same billionaire.   Sure, it is election time (and Turnbull no doubt wants his revenge on Peter Dutton) but the contrast to New Zealand is pretty stark.   As Turnbull put it, “this is the national security of Australia”.   The programme including comments from the former ALP senator forced to resign over his too-close ties to PRC-linked interests.

The programme has clips from Andrew Hastie, the chair of the federal parliament’s intelligence and security committee, and from Christian Porter, Australia’s Attorney-General, responsible for the foreign interference laws.

ANDREW HASTIE, MP: In Australia it is clear that the Chinese Communist Party is working to covertly interfere with our media and universities and also to influence our political processes and public debates.

and

ANDREW HASTIE, MP: We’ve had multiple briefings at the top secret level from ASIO and other agencies that foreign interference is being conducted in Australia at an unprecedented level.

and

ANDREW HASTIE, MP, CHAIR, COMMITTEE FOR INTELLIFENCE & SECURITY: There are several authoritarian states who are involved in foreign influence across the globe. But in Australia the Chinese Communist Party is probably the most active. China is seeking to influence our elites, particularly our political and business elites, in order to achieve their strategic objectives.

There is chapter and verse –  including emails –  on one particular episode of the PRC embassy/consulate pressuring a local council to decline sponsorship from one of the few Chinese-langugage media outlets that won’t bend to PRC pressure.

Or accounts of an ethnic Chinese radio host –  himself too scared to talk to the ABC –  whose programme was stopped because he wouldn’t bend to the demand to not say anything negative on air about the PRC or the CCP.

We had comments from John Garnaut, previously Fairfax’s correspondent in Beijing, and then senior adviser to Malcolm Turnbull (and author of a classified report on PRC influence/interference in Australia).

Of the aforementioned billionaire

JOHN GARNAUT, FMR ADVISOR PM, MALCOLM TURNBULL: There is a lot of well documented evidence, to use your word, of Huang Xiangmo’s umbilical connection to political organizations which were guided, if not controlled, by Beijing. He was the president of the most important United Front work department platform in Australia.

JOHN GARNAUT, FMR ADVISOR PM, MALCOLM TURNBULL: Well, it tells us how cheap our political systems are. I mean, it’s extraordinary that nobody did any due diligence, any serious background checks for so long. In fact, it was the case also, people weren’t even reading the newspaper. So, political systems and parties just took what they could for as long as they could get away with it. And the danger was, that they were becoming financially dependent on a foreign political system. And that is a precarious place to be.

SAM DASTYARI, FMR ALP SENATOR: I’ve been very upfront and honest. I was too close to the big donors like Huang Xiangmo, I paid a very, very high price for that, I resigned from Parliament because that was the most appropriate thing that I could do.

Dastyari goes on to note his (successful) efforts to get approval from Peter Dutton for an (almost unprecedented) private citizenship ceremony for the wife and children of the billionaire.

Of the billionaire, Andrew Hastie observes

ANDREW HASTIE, CHAIR, COMMITTEE FOR INTELLIFENCE & SECURITY: He did have a lot of access. Um, he was photographed with a lot of senior figures. undeniably, he had a lot of influence. And, um, you know, you can make the connection between his donations and that influence.

Later in the programme it turns to the situation of Professor Anne-Marie Brady, whose house was broken into the day before she was due to testify before Hastie’s committee.

PROF. ANNE-MARIE BRADY, UNIVERSITY OF CANTERBURY: There are many indications that from the start, from what was taken and what was left behind, that make it look like it was not your normal burglary, for example, targeting of a broken laptop. Of no value to anybody, unless you wanted to know who my contacts are or get other evidence off my laptop. Taking a burner phone that I’d last taken to China, but not taking cash, not taking other valuables that are of great re-saleable value. That’s unusual.

ANDREW HASTIE, MP, CHAIR, COMMITTEE FOR INTELLIFENCE & SECURITY: We were very disturbed. We had an esteemed academic from New Zealand, telling us that she’d had her, ah, home broken into, her laptops taken from her, and she was suggesting foreign interference. We took it very seriously.

The presenter goes on to report that

Government sources [NB, presumably Australian government sources] have confirmed to Four Corners that intelligence assessments identified China’s spy service, the Ministry of State Security, as the prime suspect behind the intimidation of Brady. Just after she was called before the Australian parliament, Chinese intelligence agents interrogated her academic collaborators in China about her testimony, which had been published on the parliamentary Hansard record.

PROF. ANNE-MARIE BRADY, UNIVERSITY OF CANTERBURY: There was a visit to the university who had hosted me in November 2017, also from the Ministry of State Security, and they were upset that I had spoken to Hansard about that evidence. All these kind of factors told me that I was of interest to the Ministry of State Security in China.

There is more on the intimidation and imprisonment of a couple of Chinese-born Australians.  Well worth watching and reading.

Perhaps the other bits worth quoting relate to the question of political donations.  Here is Hastie

ANDREW HASTIE, MP, CHAIR, COMMITTEE FOR INTELLIFENCE & SECURITY: When it comes to donations, particularly, politicians should be naturally circumspect about who they receive donations from. Particularly if donors have connections to overseas, and particularly to foreign governments who are seeking to influence our political processes.

Would that we heard anything of the sort from any New Zealand MP.  The programme goes on from there to focus on one particular donation

Jack Lam is a member of three organisations involved in the Chinese Communist Party’s united front overseas influence network. He also a fugitive. In 2017, Lam was charged with paying a 1.3 million dollar bribe to senior immigration officials in the Philippines.
After fleeing the Philippines, Jack Lam visited his Australian golf club, twin creeks. It was there in February 2018 that Lam and fellow director Tommy Jiang hosted a golf day. Their special guest was Tony Abbott, who as prime minister had been warned by ASIO about foreign influence and donations. A fortnight later, Tony Abbott was again hosted by Twin Creeks, this time for an event supporting his local liberal party branch. Mr Abbott told the fundraiser he was no friend of communism, while the liberal party later declared $40,000 in services donated by Twin Creeks.

JOHN GARNAUT, FMR ADVISOR PM, MALCOLM TURNBULL: Look, if I was a politician, I wouldn’t be taking money from somebody who is involved in a foreign propaganda outlet.
NICK MCKENZIE: Why not?
JOHN GARNAUT, FMR ADVISOR PM, MALCOLM TURNBULL: Because there’s at least the risk of the perception of conflict of interest, of being tainted.

That’s all Australia, of course.  But why, given what we know about Australia, and the work of people like Anne-Marie Brady on New Zealand, why would anyone suppose that the situation here would be any less serious?  The names, laws, and precise details will differ, but the interests – on both sides of those corrupted exchanges – won’t be.

But what do we have here?  Take those Four Corners comments about the Brady break-ins.  The Prime Minister has shown a longstanding preference for nothing uncomfortable to be discovered about those break-ins, never once making a robust public defence of Brady’s position and the appropriateness of her work. It all seemed embarrassing and potentially awkward for the government.

The Herald had an article on Tuesday following the Four Corners programme, which included this (with, incidentally, a Huawei advert appearing between the second and third paragraphs when I downloaded the article)

But last night Australia’s Four Corners current affairs TV show said conclusions had been reached behind closed doors in Canberra.

“Government sources have confirmed to Four Corners that intelligence assessments identified China’s spy service as the prime suspect behind the intimidation of Brady,” the programme said.

The claims were rejected last night by Ardern, the minister responsible for national security, who said she had seen no such assessment.

“This claim is completely wrong. I have received no advice identifying the Ministry of State Security as the prime suspect.”

It is a strange comment, because the transcript suggests that the comment was about Australian government sources.  What would our Prime Minister know about the views of the Australian security services on such issues?    Perhaps the ABC meant New Zealand government sources, but even if so, given her clear lack of interest in any embarrassing outcome to the Brady case, why would she even necessarily know who  the New Zealand Police and security services regarded as the prime suspect?    Perhaps it would be constitutionally appropriate for her to be told if she asked, but if her office made clear that she didn’t want to know any potentially embarrassing (but not beyond reasonable doubt) stuff I doubt they would be rushing to tell her.  After all, Andrew Little, not her, is Minister for the SIS, and Stuart Nash, not her, is Minister of Police.  It might be quite convenient for her not to know, given her apparent desire to keep firmly on the right side of Beijing.

Ah, but of course we have the inquiry into potential foreign interference being conducted by Parliament’s Justice Committee.  Under pressure –  after attempting to block Anne-Marie Brady from appearing –  the committee finally opened public submissions.  But who chairs the committee?  Why, the same person who (a) tried to block Brady, and who (b) has strong connections to various United Front bodies, and is on record as supporting, for example, PRC perspectives on Tibet.  I don’t suppose he will be fronting for any current affairs programme any time soon on PRC interference in New Zealand, or that he would have much credibility if he did.

This morning, the heads of the GCSB and the SIS appeared to testify to this inquiry.  The text of their public remarks is here.  It was all pretty tame and, mostly, quite convenient stuff.   They claimed they would give more material in a classified briefing to the committee –  of the sort which, if disclosed, would “be likely to affect New Zealand’s national interests in an adverse manner”.  You mean like naming names (countries or individuals), which would no doubt be uncomfortable for our politicians, but might well be in the interests of our country?

There were a few interesting snippets nonetheless.

NZSIS and GCSB therefore use “foreign interference” only to describe an act by a foreign state, or its proxy, that is intended to influence, disrupt or subvert a New Zealand national interest by covert, deceptive or threatening means.

That must be frightfully convenient.  So if, for example, someone who had served in a foreign state’s military intelligence and had close ongoing ties with, including business interests in –  all of which had been widely known for some time – was sitting in the New Zealand Parliament that wouldn’t count as “foreign interference”?  I guess not, it is more like “domestically-chosen subservience”.

Offering well-paid jobs to former members of Parliament and ministers in entities owned or controlled by foreign state wouldn’t count as “foreign interference” either on this definition.  The incentives in those arrangements are quite obvious.

Much of the GCSB/SIS commentary seems very concerned with material along a spectrum of what they label “misinformation”, “disinformation” or “malinformation” (you can look up their definitions for themselves).  As they note, there wasn’t much sign of this stuff in the 2017 election.  On the other hand, there is a very major media outlet that runs People’s Daily articles, has a Chinese-language outlet, which is alleged to select stories for their acceptability to Beijing, translate articles in similar directions, and where the parent outlet allows one its staff –  who serves on the Advisory Board of the government-funded smooth-the-Beijing-waters propaganda body  –  to write about PRC issues (at all, let alone with no disclosure of that potential conflict).

Is there some good stuff?  Sure.

Motivated state actors will work assiduously over many years, including in New Zealand, to covertly garner influence, access and leverage.

But there is also quite a bit that reads as if the GCSB/SIS would really preferable the great unwashed were not even aware of the issue (emphasis added)

I would also note, given public commentary on these issues, that interference efforts do not need to be successful to cause damage to our democracy. Trust in the institutions of government and democracy can easily be eroded.

and

Whether or not interference activities are effective, growing awareness of them creates room for the perception, domestically and internationally, that foreign states wield improper influence in New Zealand. This perception may be concerning to New Zealand’s partners and may degrade confidence in our values and democratic institutions;

Perhaps you didn’t intend to convey a sense that it would be better if only all this were kept under wraps, but that is how it read to me.

What about some other good stuff?

Manipulation of expatriate communities is a vector for interference. Some states engage overtly or covertly with their diaspora as a means to achieve strategic aims. NZSIS is aware of efforts by foreign states to covertly monitor or obtain influence over expatriate communities in New Zealand. Shared culture, language or familial connections can facilitate this. Ongoing family ties in the foreign state can be leveraged to suppress unwelcome political or religious activity.

Foreign language media is another way through which expatriate communities or diaspora populations can be influenced or mobilised towards particular issues, including issues relevant to elections.

Which country has a large diaspora here, where such issues might be relevant? North Korea?  No.  Russia? No.   Iran?  No.   (Not even what is left of ISIS).  So I guess that leaves the PRC.  But haven’t people in a position to know suggested that the chair of the committee hearing this evidence is close to the PRC embassy?

On political donations, they pull their punches.

….political donations are a legally sanctioned form of participation in New Zealand politics. However, NZSIS becomes concerned when some aspect of the donation is obscured or is channelled in a way that prevents scrutiny of the origin of the donation.

One of the main reasons we become concerned about these activities is because as relationships of influence, or a sense of reciprocity is established, they may be used as leverage to facilitate future interference or espionage activity.

I have already commented on the constraints we face in talking about specific intelligence. However, in broad terms, I can say that we have seen activities by state actors that concern us.

So it wouldn’t raise concerns with the SIS if a New Zealand citizen with close ties to the PRC /CCP authorities arranged for fully-disclosed and lawful substantial donations to a political party?

Or if such donors –  often photographed with New Zealand political figures –  were being given royal honours?

I guess not, because after all whatever motivations the PRC might have, in the end it is willed deference, and deliberate looking the other way, by New Zealand politicians.    Remember that Andrew Hastie quote from the Four Corners programme

ANDREW HASTIE, MP, CHAIR, COMMITTEE FOR INTELLIFENCE & SECURITY: When it comes to donations, particularly, politicians should be naturally circumspect about who they receive donations from. Particularly if donors have connections to overseas, and particularly to foreign governments who are seeking to influence our political processes.

Would that they were, would that they were.

Quite probably the heads of the SIS and GCSB are well-intentioned people, but when I got to the final page of their testimony there was a line that highlighted the kabuki-theatre nature of this inquiry.

We also need to equip those on the front line of our democracy – Members of Parliament, Ministers, political parties and relevant government agencies – with the capability to identify and protect themselves from foreign interference risks.

It is our political parties, members of Parliament, and ministers who are the real problem here (enabling most –  but not all –  of what probably should be of real concern), and yet Kitteridge and Hampton have to go through the motions of pretending they are the solution.

This is a Parliament where not one member, from the Prime Minister down, will express the slightest concern that Jian Yang –  acknowledged former member of the PLA intelligence system, someone who acknowledges misrepresenting his past on his residence/citizenship firms, someone who was a CCP member (and experts tell us no one leaves voluntarily) –  sits today –  as he has for eight years now –  in the New Zealand Parliament.  One where the presidents of the National and Labour Party compete in their gushing praise of Xi Jinping and the CCP.  One where the government refuses to say anything about gross human rights abuses, and the Opposition foreign affairs spokesperson channels CCP propaganda.  And where many of those close to these things know that there is a significant issue around political donations, and yet no party is willing to take a lead, acting in a “circumspect” way, even around transactions that may be lawful but are not proper.

There was one last story out of this morning’s select committee hearing, reporting Jami-Lee Ross

The now-independent MP followed up his question by asking if Bridges had been basing his comments on a briefing from her when, in an alleged conversation between Ross and Bridges on May 14 last year, Bridges said the Chinese community were keen on a Chinese minister in a future Government.

“He said to me ‘I can’t do it because basically the spooks are telling me he’s a Chinese spy’,” Ross said.

Can’t imagine who he was referrring to…..

Wouldn’t it be pretty dreadful if such a person were still sitting in the National Party caucus?

Surely such a thing couldn’t happen?

But in New Zealand it seems to.

 

 

 

The Emperor’s clothes are threadbare

When you worked for an organisation for 30+ years you really do try to look for the best in it. Perhaps it is just me, but I tend towards optimism (notwithstanding Cassandra) and so have had trouble appropriately calibrating my expectations of the Reserve Bank.  They keep surprising me on the downside.  It isn’t so much the specific policy choices themselves (reasonable people might differ) as the too-often threadbare cases they mount in support of interventions which have taken the fancy of successive Governors, or causes Governors (especially the current one) have used their official bully-pulpit to champion.

I had another example yesterday when I opened a (very belated) response from the Bank to an Official Information Act request I’d lodged a couple of months ago.

You’ll recall that last December the Governor launched a consultative document in which he proposed to massively increase the amount of capital banks have to hold to conduct their current level of business. There had been no prior socialisation of this work, testing the analysis in expert fora etc.  Just a (very far-reaching) proposal.  A month or so later, in response to various OIA requests, they finally released some of the relevant background papers (one of which they had only written after the consultative document was released).  (In fact, four months into the consultation there was another big new supporting document released last week, although those who’ve looked at it closely say it doesn’t really shed any fresh light on the issues.)

By February, the Bank’s Monetary Policy Statement was due.  To their credit, the Bank devoted a box (Box E),  a couple of pages in length, to the proposal, under the heading “Monetary policy implications of higher bank capital requirements” (pages 35 and 36).

They make a number of claims in the box.  They correctly note the need to distinguish between the transition and the long-run (itself something of a concession, since there was no discussion of the transition at all in the consultative document itself).

Of interest rate effects they note

All other things unchanged, bank funding costs would rise as a result of their higher capital requirements, because the cost of equity (in terms of investors’ required rate of return) is usually higher than debt. This could lead banks to increase lending rates, lower deposit rates, and/or tighten credit standards in order to retain their expected return on equity.

However, in reality, the impact on the lending and deposit rates will be affected by a range of offsetting forces.

The extent that banks will be able to pass on their potentially higher funding costs – in the form of higher lending rates and lower deposit rates – will be constrained by:
• competition from both within the banking sector and alternative
sources of funding (for example, capital markets); and
• other interest rates in the economy being broadly unchanged, or
lower, as risk premia in New Zealand decline.

Hard to argue with most of that (I would make an exception for the second bullet).

They went on to elaborate that particular point (a little)

The increased stability of the banking system should reduce the risk premium associated with investing in New Zealand. This results in a reduction in the expected frequency and severity of economic disruption associated with systemic financial crises.

Summing up

In the long run, bank lending rates are likely to be slightly higher. How much higher depends on a range of factors, such as how much the cost of equity and debt for banks declines, the degree to which risk premia in New Zealand fall, and how competitive pressures affect banks’ ability to pass on costs to customers in the form of higher lending rates or lower deposit rates. The Bank expects that the spread of banks’ lending rates to the rates at which they borrow will settle in the range of around 20 to 40 basis points higher as a result of the proposed changes, although the exact effect is uncertain.

And then there is a further claim

Higher bank capital requirements could also improve the government’s fiscal position. A higher share of bank equity funding would likely increase tax revenue from the banking sector since debt funding is tax-deductible while equity funding is not. The value of any perceived implicit public guarantee of the banking system would also be reduced as the system becomes safer, improving the government’s credit profile.

And there was a final interesting observation

If implemented, changes to bank capital requirements are likely to affect economic conditions through a number of channels.

At his press conference that day, the Governor was also quizzed extensively about the capital proposals.  In the course of that press conference the Governor told the assembled media that the proposed capital requirements would be well within the range of norms” seen in other countries.

All of which was interesting, but supported (on the day) by no further analysis.  And so I lodged an official information act request

I am writing to request copies of any analysis undertaken by or for the Bank in support of Box E in today’s Monetary Policy Statement, including (but not limited to) the numerical estimate of the impact on the banks’ lending margins.

I am also requesting any material/analysis used to support the Governor’s claim (at the press conference) that the proposed capital requirements will be “well within the range of norms” seen in other countries.  I would note that there was no such supporting material in the Bank’s consultative document.

And finally on Monday, having had the request extended for a month to allow for, as they put it, “ongoing consultations” I had my answer.

I have tended all along to assume that the Bank would have done extensive and detailed analysis, and would have been keen to get that analysis out into the public domain to, as they would see it, strengthen the case for the proposals they clearly believe to be in the public interest.

But the evidence is increasingly against that presumption.  The response from the Bank is here.    There was only six pages of it.   There is, apparently, one (possibly substantive) paper

Paper 1.6: What might higher bank capital requirements mean for monetary policy?

But they simply refuse to release any of that, on principle.

The second document is a single page exercise in arithmetic, described as

Table: Stylised example of the pricing impact of different required returns on equity

I did not check every calculation but I have no reason to doubt the numbers are what they say they are. It is the sort of exercise a new graduate should have been able to churn out in a couple of hours.  It appears to be the source of the suggestion that bank lending margins might widen by 20 to 40 basis points.    But –  being a stylised example in a simple table –  there is no discussion or analysis about whether the scenarios are the correct ones, no engagement with estimates other analysts have come up with, no discussion of (for example) whether for the wholly-owned Australian banks (which dominate the market) group earnings variability etc might not be a relevant metric (shareholders in ANZ Banking Group probably do not great care whether the profits –  mean and variance –  come from the New Zealand operations, the Australian operations, or anywhere else in the world).  Just nothing.

There is no discussion or analysis of those (entirely reasonable) points in the MPS about the extent of competition from entities not subject to the capital requirements, possibilities of disintermediation and so on.  Nothing.

There was also, apparently, nothing to support the claim made by the Bank that overall New Zealand interest rates would fall if the capital proposals were adopted, and nothing to support (or quantify) the suggestion that the capital proposals might be fiscally positive (recall that in his speech a few weeks later, Geoff Bascand suggested that the proposals would permanently reduce the level of GDP by up to 0.3 per cent, which would surely also have some fiscal consequences).

And that was that on the material in the two page box: one page of arithmetic.  Breathtaking really.

The rest of the release was devoted to material to support the Governor’s claim that the Bank’s proposed capital requirements would be, in the words of the Governor, ‘”well within the range of norms” in other advanced countries.

One piece they released was this slide they had used in a presentation to the Minister of Finance on the day the Governor made his public comments.

MOF slide.png

The comparisons with Australia –  surely the most relevant? –  are simply asserted, with no supporting evidence or analysis (nothing that, for example, recognises that the Reserve Bank is proposing to pull up the floor (on the weights used in calculating risk-weighted assets in the first place) much further than Australia has done).  Nor do they acknowledge to the Minister that the sorts of capital they propose to rule out not only does the job in the event of a bank failure (and bank failures of trans-Tasman banks are inevitably going to be handled in a trans-Tasman way), but is much less expensive than what they are proposing to require.

In any case, this slide is not analysis, and we do not gain any insight from being told that the Governor told the Minister the same as he told the journalists.  In reality, it seems to be enough for the Bank to say it is “hard to do” the comparisons, so do not expect us to do them.

You will have noticed a couple of other comparisons on the slide. They are covered a bit more extensively in a document described as

Media resource: international comparisons of bank capital ratios, 12 December 2018

That was the day before the consultative document was released.  Presumably some people have had this document for months, and yet the Bank took two months to release it under an OIA.

Among the shonkiest bits of the document is a comparison (using World Bank data) of the unweighted 2017 ratio of total capital to total assets.  Of the seven other countries they choose to cite, New Zealand conveniently would sit almost bang on the median  But so what?  First, these proposals are to markedly increase the amount of capital banks in New Zealand have to hold: in fact on the numbers the Bank uses in that stylised table (see above) total capital to total asset after these changes were implemented would be above those of any of the seven other countries the Bank sought to compare us with.  And second, and perhaps more importantly, the reason why capital frameworks focus on risk-weighted assets is that not all assets have similar risk characteristics: the balance sheets of New Zealand banks, for example, look very different to those of US banks.

But I suspect the Bank itself doesn’t really regard that data as relevant.  They seem to put most weight on the S&P framework, and some on the BIS comparisons.   I dealt with both of those at some length in my post on Geoff Bascand’s February speech.   Of the BIS comparisons I noted then

All else equal, a 16 per cent capital ratio calculated on Reserve Bank rules could easily be equivalent to something like 19 per cent in many other countries’ systems.   And not even the 95th percentile of G-SIB banks will –  according to the BCBS table –  have a Tier 1 capital ratio of 19 per cent.

But here is the rather plaintive tone of the Bank’s comments in the 12 December document, finally released now.

S&P RB

“We acknowledge that there is a genuine interest…..which cannot easily be met”.    Give us strength.  Well, give us a rigorous and robust official agency, because on this sort of evidence we certainly don’t have one at present.

Here is some of what I wrote about the S&P numbers in February

The rating agency S&P engages in its own attempt to calculate risk-weighted capital ratios for a large number of banks, using its own risk-weighting framework.   But a great deal depends on the “economic country risk score” the S&P analysts assign.    And they take a dim view of New Zealand, assigning us a score of 4 (on a 10 point scale).  Here is what that means for housing risk weights

S&P risk weights

And there are similarly large differences for the corporate risk weights.

As I said, S&P gives New Zealand a 4.   But Sweden, Norway, Belgium, Switzerland, and Canada all get a 2.    You might think there are such large systematic economic risk differences between New Zealand and those countries, but I doubt the Bank really does, and I certainly doubt. I wrote about this a few years ago where I noted

The S&P model appears to put quite a lot of weight on New Zealand’s relatively high negative NIIP position. But I think they are largely wrong on that score too. First, the NIIP/GDP ratio has been fluctuating around a stable average for 25 years now. That is very different from the explosive run-up in international debt in countries such as Spain and Greece prior to 2008/09. But also the debt is largely taken on by the government (issuing New Zealand dollar bonds) and the banks. No one seriously questions the strength of the government’s balance sheet, or servicing capacity, even after years of deficits. And the ability of banks to borrow abroad largely depends on the quality of their assets and the size of their capital buffers. If asset quality really is much poorer than most have recognised, rollover risk could become a real problem, but it isn’t really an independent source of vulnerability.

Score us as a 3 or even a 2 and suddenly the Deputy Governor’s chart will have the implied capital ratios for New Zealand banks a lot higher.

The Bank knows all this, but despite attempting to rely on these numbers they make no effort to highlight the limitations (and there are others with the S&P methodology).

As I noted in that earlier post

There aren’t easy right or wrong answers to some of these issues, but the uncertainties just highlight how much better it would have been if the Reserve Bank had engaged in an open consultative process at a working technical level, before pinning their colours to the mast with ambitious far-reaching proposals.

(Incidentally, I see that I also made this point in February.

As another marker of what is wrong with the process, the Deputy Governor told us yesterday that the Bank will be releasing an Analytical Note on the Bank’s estimates of the costs of their proposals: it will, we were told, be out in a “couple of weeks”, by when two-thirds of the (extended) consultative period will have passed.

That Analytical Note still hasn’t been published.)

In truth, despite the Governor airily declaiming that his proposals are nothing to worry about, and comfortably within the range of international requirements, so far they have produced no evidence or analysis that could lead reasonable observers to share his confidence.  That simply isn’t good enough.

There is no sign, for example, that the Bank has ever seriously engaged with APRA and in a mutual process sought to robustly assess how each regulator’s proposals would apply to the same portfolio of assets.    If the two agencies both agreed on the results, I’d probably be persuaded (not necessarily that we need such high ratios, but on the relative demandingness of the two sets of rules themselves).   Similarly, they have made no effort to sit down with the regulators in the countries with the (apparently) most demanding capital rules (Sweden?) and look at how their rules and those the Reserve Bank are proposing might work out (in terms of required capital) for the same portfolio of assets.  It might not be easy to do, but….that is what we fund the Reserve Bank and pay Reserve Bank staff for.  There are huge amounts of money involved here  (my former colleague Ian Harrison called it The 30 billion dollar whim and, on a quite different approach I suggested that the Bank’s own guesstimates of the real economic costs could easily capitalise to $15 billion).

With no sign that the New Zealand financial system is imperilled –  recall that the Bank itself tells us every six months that it is strong and stable –  there is no obvious a priori case for much higher capital requirements: any such case needs to be made rigorously, in detail, with lots of careful scrutiny.  In other words, in ways quite unlike how the current ambitious proposal has been done.   It may have been the outcome of a meandering multi-year process (on lots of things other than the minimum ratio), but in the end it looks a lot like the fruit of a gubernatorial whim, without even the decency of constructing a robust ex post rationalisation that would withstand serious scrutiny.

That simply isn’t how policy in a serious country should be made.   And the frightening thing about the New Zealand system is that if the initial proposal was one man’s whim, the same one man is the final decision maker: prosecutor, judge and jury in his own case, with no subsequent rights of appeal.  There is no decisionmaking board, no separation of management from final decisionmakers, no powers for the Minister of Finance to have any say.  Just one unelected man pursuing a whim.

(If you still happened to think that policy advice in New Zealand was that of a serious country –  actual whether you do or don’t –  don’t miss checking out Eric Crampton’s post yesterday on a new adventure and enthusiasm for The Treasury.   As a flavour

Imagine surprising Aotearoa with a strain of compassion so delightful that it re-wires our collective consciousness!

Don’t miss clicking through to the feelings game.  You too might want to spend $113.85 on a set of feelings cards, devised by a business set up by a former Treasury staffer who

She saw an opportunity for her and other people within the Ministries to more deeply, creatively and energetically serve New Zealanders by bringing more of their hearts to work and being able to more empathetically connect with colleagues, staff and service end users.

Spare us.   As one of New Zealand most eminent economists, now resident in Canada, put it “if I were dead, I’d be rolling in my grave”  )

 

 

Indicators galore

The Government Statistician can’t manage a census competently, and won’t tell us (let alone MPs) just how bad the situation is (about a census taken more than a year ago), but today – aiding and abetting the government’s Wellbeing Budget branding – she was out with the final list of indicators to be published in this brave new world.   It goes under the label “Indicators Aotearoa”, and in addition to not being able to run a census, she seems –  in common with many public servants –  to have forgotten the name of the country: New Zealand.

Among the list of indicators –  many of which are already published (and thus you wonder what value there is in one set of bureaucrats prioritising them and putting them in one place) –  was this snippet.

indicators

I don’t have too much problem with suicide rates.  They are reasonably hard and somewhat meaningful data (but comparisons across time and across countries are hard).

But the other three made almost no sense.

Take that “spiritual health” indicator –  well, there is no indicator yet, but an aspiration to have one.  Real resources are being wasted on this stuff.    Who knows what business it is of the government to be measuring “spiritual health”, whatever it means?  And, strangely, it appears that the Government Statistician believes that only the “spiritual health” of Maori people (or was that “Maori society”?) matters.  Are we back in taniwha territory again, or perhaps the Governor of the Reserve Bank is helping with his enthusiasm for the tree god (although I gather the Governor isn’t Maori so his affinity presumably doesn’t count).  As readers know, I’m a Christian, of a fairly orthodox variety.  The General Confession of the Church of England’s 1559 Book of Common Prayer –  Anglicanism having been the most prominent religious strand in New Zealand for most of its history –  reads (emphasis added)

ALMIGHTIE and most merciful father, we have erred and straied from thy waies, lyke lost shepee we have folowed to much the devises and desires of our owne hartes. We have offended against thy holy lawes: We have left undone those thinges whiche we ought to have done, and we have done those thinges which we ought not to have done, and there is no health in us,

It goes on to talk of restoration and penitence, but “there is no health in us” is pretty basic to orthodox Christian belief. Our hope is only in grace.

Now, perhaps, not being Maori, my lack of spiritual health won’t bother the Prime Minister and the Government Statistician, but what about the Maori Anglicans?

The whole thing is absurd, lacking content.  Simply pandering in a way that makes even more of a joke of the framework –  itself, in part a way of distracting attention from decades of economic failure.

Then there is the language development and retention one  –  again, no actual indicators only aspirations.   Apparently it is a problem for the Government Statistician and the Prime Minister if an ethnic Chinese New Zealander whose ancestors came 100 years ago doesn’t speak Chinese.  Or a descendent of a Dalmatian immigrant who doesn’t speak Croatian?  Isn’t that a matter of (a) probably, assimilation, and (b) choice?   What business is it of the governments?  Isn’t the ability to speak English much more important?

What is this nonsense?

And then we have the “sense of belonging” to New Zealand which –  according to the Government Statistician –  is an “important aspect of being a New Zealander”.  Except that….if you were born here and have lived here all your life, you are unquestionably a New Zealander, however you might answer an SNZ survey.    I haven’t lived here all my life, but I have no other citizenships (or rights to them) but how would I answer the question?  I don’t know.  “New Zealand” certainly isn’t my first loyalty, I feel a fairly strong affinity for the wider Anglo world, and I’m a minority in New Zealand but an adherent to a faith that transcends national, ethnic or whatever boundaries.  Globalists –  of whom I’m not one –  will probably (rationally) tell the interviewer they identify with “the world”.  And what of it?   Sure, a number emerges from the survey, but it will mean almost nothing, and its place in this suite of indicators will encourage officials and politicians to think it is something they should try to use policy to influence (all sort of daft interventions might “work”, but to what end?).

Couldn’t the Government Statistician just get on with doing the basics right?   And if the government were to take seriously doing something about reversing the longrunning decline in our relative productivity performance, it would open up options to improve all sorts of things that, individually or collectively, we care about.  Probably wouldn’t do much for (Maori) spiritual health, should they ever be able to “measure” it.

 

 

Economics, economic policy, public policy

Yesterday afternoon I attended a forum at Victoria University arranged to discuss ideas in a paper written by Gabs Makhlouf, the outgoing Secretary to the Treasury, and one of his staff, Udayan Mukherjee (currently doing masters study at Cambridge).  The paper is still described as “draft for discussion”, but that apparently includes wider discussion (I checked and the authors didn’t mind it being more widely quoted).

The paper is under the title “Economic Policy in the Public Square: A Perspective from New Zealand”, and is 30 pages of reflections on a variety of issues around economics, economic policy, and public policy more generally.  I’m not quite sure what motivated the paper, although The Treasury has faced some criticism –  mostly justified in my view – in recent years around such things as an apparent de-emphasis on economics skills, and various aspects of the Living Standards Frameworks (including caricatured representations suggesting that some previous generation of advisers or policymakers had once thought GDP was everything).   At very least, some of that criticism must have been context for the Secretary to the Treasury to have devoted his scarce time to such a project.

The paper itself didn’t end getting that much attention in yesterday’s forum: Mukherjee gave a fairly brief introduction, and then we had three panellists (one foreign PhD student, and two of the eminent figures of New Zealand economics, Arthur Grimes and Gary Hawke), each of whom had their own hobbyhorses to pursue, and the discussion constantly seemed to veer towards universities and what they should teach, or which courses a budding economist should pursue.

There were bits of the paper I quite enjoyed. I’m a history buff and any time someone addresses the history of economic policymaking in New Zealand I’m interested (Mukherjee is apparently doing work in this area for his masters).  I quite like playing devil’s advocate (mostly because I think it is actually a correct interpretation) around the contribution to economic policy of Sir Robert Muldoon (quite a lot of liberalisation happened on his watch, in very challenging times, even as some very costly choices – especially around Think Big – were made late in his term), and so it was good to see Jim McAloon’s book on post-war economic policymaking cited.   I’m less persuaded by their suggestion to de-emphasise debates about the post-1984 reforms (that suggestion seemed, consciously or not, more likely to reflect the fact that one author wasn’t here at the time, and the other hadn’t yet been born).   The biggest upheaval in New Zealand policy (economic or otherwise) for generations is inevitably a key point of reference, especially as policy subsequently has largely descended into somnolence.

But if there are interesting snippets, the paper overall seemed to be a bit of a muddle, especially for a piece carrying the imprimatur and co-authorship of one of our most senior public servants and policy advisers.  If the paper is ever revised and finalised (and Makhlouf will soon have time on his hands) I think it could do with quite a bit more work.

Thus, you’ll notice the title of the paper.  The suggestion is that the paper is about “economic policy”.  They don’t define that term, but I think it wouldn’t be unreasonable to take it as including macroeconomic policy (overall fiscal policy, monetary policy, perhaps financial system regulation) and things that are directly focused on overall economic performance (whether economywide or sectorally).   One could think of (most of) immigration policy, R&D policy, policy around trade agreements, tourism policy or whatever.  On such important issues, it seems pretty unquestionable that we should form our public service expert advice, primarily (although of course not exclusively) from an economics perspective.  On some of those sorts of issues, international perspectives and literature will provide most of what is needed. On others, there will be some distinctive New Zealand perspectives and angles.  We need advisers who are able to draw on (substantially economic) theory, evidence, and experience, debate and distill what is relevant and what (probably) isn’t, and so on.   That is particularly so when The Treasury is offering a perspective on proposed policy initiatives or expenditure (you might expect individual sectoral agencies to have a wider range of skills and expertise).

But to the extent there is a debate, I don’t think it is about those areas, or the centrality of economics expertise in shaping policy analysis and advice on them.  The Treasury hasn’t been very active in generating serious advice on productivity –  they might say they’ve been underfunded, or had masters who weren’t interested –  but I doubt they’d seriously suggest that if they were going to do much work in this field that economics/economic history wouldn’t be the primarily relevant set of skills.  The review of the Reserve Bank Act is being led by people with a pretty strong economics background, and appropriately so.

There is also some lack of clarity in the paper about whether they are talking about policymaking, or policy advice and the analysis that informs it.  Often they talk about policy makers, but mostly (I think) they means advisers (like themselves, although not necessarily limited to the public service).   Policymaking is mostly done by ministers (and, to their credit, Makhlouf and Mukherjee push back against suggestions that more policymaking should be done by independent agencies) and no one thinks that a formal economics training should be some sort of prerequisite for getting to sit in Parliament, let alone the Cabinet (even serving as Minister of Finance).  For what it is worth, Donald Trump’s degree majored in economics.  (Margaret Thatcher did chemistry, Roger Douglas accounting.)

But perhaps the more worrying conflation is around what sort of policy we are talking about.  Specifically, the authors do not draw any sort of distinction between things we might more normally think of as “economic policy” (see above, and the title of their paper) and “public policy” more generally.

If, as a Cabinet minister (or a voter) I wanted public service advice on the appropriate specification of an inflation target, or on positioning New Zealand to cope best with the next serious economic downturn, it is advice informed by economics that I should want, and would benefit from.     There may be some other useful perspectives, but they will be peripheral in nature.

But if, as a Cabinet minister (or a voter), I wanted advice on the appropriate freedom of information legislation to adopt, economics isn’t the set of skills I would sensibly be first looking to.   Same might go for abortion policy, or policy around freedom of speech, or defence policy, whether New Zealand should be a republic, or policy on scandalising the court.  It isn’t that there are no relevant insights that economists might offer on such issues, or questions they might pose –  including the always-relevant issue of resource constraints and opportunity costs – but it is unlikely to be the most useful paradigm (or even set of paradigms) for informing and framing decisions ministers and MPs have to make in such areas.

A senior Treasury official recently mentioned to me a conversation with another public servant, who had posed the question “if I’m doing public policy [perhaps “doing public policy well”], am I doing economics?”      To which the answer surely has to be, and should be “not necessarily”, and “it depends”.  Top-notch senior public servants need to be able to discern which skills and experiences, and formal frameworks, are relevant to which issues, and hire (and contract in, and consult) accordingly.

Many of these issues seem to resolve to the staffing and role/clout of The Treasury.   I happen to think that huge spending departments (eg Health, Education, and MSD) would benefit from having a stronger economics perspective in their policy advice and evaluation activities, but I doubt anyone thinks the policy and research functions of such agencies should be stocked only with economists.   But is it reasonable to expect that a small central agency such as The Treasury will be able to maintain anything like critical mass in the sorts of disciplines central to the advice and practice of these spending ministries? (One could say the same about climate scientists for example.)  I doubt it.   And thus, it still seems likely that when Treasury is challenging and reviewing ministries’ spending or regulatory proposals, the discipline they can most usefully and consistently bring to bear is economics (and, perhaps, some basic accounting).  It should be a matter for ministers, meeting as a Cabinet, to determine what weight to put on a Treasury perspective, as opposed to the perspectives of other expert advisers, and their own wider “political” considerations.  If there was a brief period when The Treasury (and its paradigm) was in some sense “too dominant” that was, in the end, a political choice.

In the end, there is a great deal of straw-manness about the Makhlouf/Mukherjee paper.  The authors quote the line from the former Secretary to the Treasury, Henry Lang, about “a fine mind” being more important than any specific formal academic qualification in a particular discipline.    They also note the importance of communications skills.  And they repeat a great quote from Keynes

“the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher – in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician”

Has anyone ever argued that a narrow economics training is the only useful or appropriate qualification to be a good Treasury official, or a top public servant more generally?  I don’t believe so.  Of course, narrow expertise (of all sorts) has its place, and perhaps in a small country we are more at risk than larger countries of not even having those deep reservoirs of specialist expertise.

But isn’t Keynes’s conception –  although articulated as applying to a “master-economist” –  actually true to a considerable extent of what we should be wanting from the top-tier of public service policy advisers, whatever academic discipline they have taken their first degree in?   It is things about character, breadth, and depth, ongoing intellectual curiosity and sound judgement that are likely to be the key considerations (as distinct, say, from keeping on side with the State Services Commissioner).    I happen to think we should be recruiting as Secretary to the Treasury someone with credibility among economists, but it wouldn’t be close to the only thing I was looking for, and I can think of many senior economists who would be quite unsuitable for the role.  And there are plenty of people who took a broad range of papers at university, who have more or less given up on intellectual drive or curiousity by the age of 40, and are content to repeat (perhaps with some energy) current mantras and conventional wisdom in their middle age.    Trained in economics or not, such people are dangerous (if only because they fill spots which should be occupied by someone nearer that Keynesian vision –  if perhaps with a bit more humility, and awareness of the crooked timber of even the greatest official, than perhaps Keynes tended to foster, in himself or others.)

This post has gotten rather long and discursive.  Perhaps I would just end with one final point. The focus of the paper tended to be on the public service.  And yet a strong public service and effective policymaking is more likely when there is a strong academic contribution.    Unfortunately, there are not many academic economists making a prominent contribution to debate on economic issues (or an economic perspective on other issues) in New Zealand.  The incentives for them to do so are not particularly strong, and if there is one thing economists tend to agree on it is that incentives matter.  Perhaps the Treasury, in its stated desire for economics to play a bigger part (the Secretary talked in his closing remarks of this as “a moment in time” when economists “can really make a difference”), might look to their advice around incentives in the academic context. I’ve told before the story about the conference the Reserve Bank and Treasury hosted in 2011.  We were offering substantial amounts of money (by academic standards) for papers that might shed light on issues around (New Zealand)macroeconomic imbalances, productivity underperformance etc.   We managed to sign up the Irish academic who is shortly taking up the job of chief economist of the ECB.  We couldn’t find a single New Zealand academic willing to take up our offer.

 

The Reserve Bank tries to explain wages…..or not

On Friday afternoon an email turned up from the Reserve Bank of Australia with this simple message

Draft copies of papers presented at the Reserve Bank of Australia 2019 Conference – Low Wage Growth – held from 4 to 5 April 2019 have been published on the Bank’s website.

That looked interesting, so I clicked on the link to the papers and found that the very first one was by a Reserve Bank of New Zealand author – not just a junior researcher, but someone who is now manager of their (economic) modelling team.   The paper had the title “New Zealand wage inflation post-crisis” which, of course, immediately grabbed my attention.   I’ve written quite a bit here about wages in New Zealand, including (in recent months) here and here.  My take has been that, if anything, wage growth in New Zealand has been surprisingly strong, given the weakness of productivity growth (most especially in the last five or six years).

There is some interesting material in the Reserve Bank paper, including the use of the highly-disaggregated data available from Statistics New Zealand’s IDI and LBD databases (my reservations of principle about them are here).  For example, the author looks at the possible contribution of industry concentration.  In the US context,

Recent commentary has highlighted the role that industry competition may play in suppressing wage inflation. The hypothesis is that firms in very concentrated industries can act as a monopsony buyer of labour, and therefore suppress wage inflation through their market power.

But

First of all, industry concentration has actually decreased in New Zealand over the past two decades (figure 11). This is in contrast to developments in the United States.

HH index

That apparent reduction in concentration surprised me a little, but it isn’t my area at all.  The author goes on to note

To account for the potential for different characteristics of workers in different industries, we have matched workers in high and low concentration industries across a range of other characteristics. Figure 12 presents the wage growth differential for matched individuals in the 2011 cohort. The figure shows that, when accounting for the different characteristics of employees across industries, those in concentrated industries tend to see slightly higher wage growth than those in more competitive industries.

Interesting, but (as they note) experimental.

But right through even that discussion, the author starts from the presumption that there is a puzzle to explain, in the form of low wage inflation.

As a reminder, this chart shows cumulative increases in New Zealand wage rates relative to cumulative growth in nominal GDP per hour worked.  A rising line suggests that, on this measure, wage rate increased faster than (loosely) the earnings capacity of the economy.

lci wages vs gdp

(Nominal) wages have been rising faster than (nominal) productivity, and there is no very obvious difference between the trend in the years running up to the 2008/09 recession and those since.

Not inconsistent with that is the labour share of total GDP, which has held up considerably more here (in the last 20 or 30 years) than in many other advanced countries.

labour share 2018

But not a shred of this appears in the Reserve Bank’s conference paper.   In fact, the thrust of the paper is such that it appears that they mostly see wage inflation and CPI inflation as the same thing, and so the paper falls back on the lines they’ve been trying to run for years as to why inflation has been so low (hint: because monetary policy was, on average, a bit tight).

This is from the Abstract

Nominal wage and consumer price inflation have been subdued in New Zealand post crisis, particularly since 2012. This paper discusses a number of candidate explanations for these muted nominal wage inflation outcomes. The most notable explanations include: a gradual absorption of spare capacity amongst New Zealand’s major trading partners; sharp declines in oil and export commodity prices in 2014/15; a significant rise in labour supply, and less inflationary pressure stemming from migration; and a change in price setting behaviour, with inflation expectations becoming more adaptive.

Basically, despite the title, it isn’t a paper about wage inflation –  which would surely focus substantially on what happened to wages given all else that had gone on in the economy – at all.

Consistent with this interpretation, I searched the document, and the word “productivity” did not appear at all, and yet in almost any possible story about longer-term wage growth, labour productivity should be one key consideration.     The author shows various charts of elements of the Bank’s forecasts they got wrong over the last decade, but again the productivity forecasts don’t appear.   Government agencies (Reserve Bank and Treasury) have done consistently badly on that score.

Carrying on with the search function, “terms of trade” didn’t appear in the paper, and nor did “investment”.

At the Governor’s speech a couple of weeks ago, a retired academic in the audience asked the Governor how the Bank was going to get away from what he (the academic) characterised as past Reserve Bank tendencies to treat wage inflation as basically the same thing as general inflation and, therefore, something to be jumped on.  The gist of the question seemed to be the (entirely reasonable) point that income shares can and do change over time, and that a changing income share (up or down) is not the same thing as inflation (or deflation).  I was a bit surprised at how the Governor answered –  he basically didn’t.  I’d thought it would be an opportunity for an expansive comment on the rich new research programme the Bank had underway, consistent with the revised mandate (and the rhetoric around it).

But this paper suggests the Bank hasn’t got far at all.  There is clearly some interesting exploratory micro-data work going on, but it appears to be of limited reach at best.  There are reasonable and interesting questions to ask about why inflation has been so low at surprisingly persistently low interest rates  (those are questions we really expect central banks to be answering).  There are important questions about why productivity growth in New Zealand has been so poor (for so long), and about why relative to that poor productivity growth wage rises in New Zealand have been quite strong (perhaps more so than in many other countries).

One can mount a reasonable case that those latter questions aren’t a prime concern of the Reserve Bank –  you can have price stability with high or low productivity growth, weak or strong labour income shares, and so on (inflation being primarily a monetary policy phenomenon).  But when you send one of your senior economists out to the public domain to speak on New Zealand wage inflation in the last decade or so, it is pretty astonishing that none of these considerations even get a mention, and instead you have a whole paper built around a misleading prior, that we should be surprised by how weak wage inflation has been.  To the extent there is a problem in New Zealand, it is more that overall economic performance has been poor, and within that underperformance, wage earners have at least held their own.

But I guess that –  whatever the facts –  isn’t a narrative the Governor would be keen on adopting.

 

Not happening (at least under this government)

I’ve had a couple of posts (here and here) this week prompted by Phil Twyford’s generally encouraging recent speech about fixing the market in urban land, in ways that might –  in his own words –  flood the market with development opportunities, and thus materially lower land prices in and around our cities.

My bottom line: I see no reason to believe that far-reaching reform –  in ways that might make a real difference, as distinct perhaps from just some rewritten laws – is actually likely to be implemented under this government.   We have a weak government, united on relatively little, and there is no sign that serious reform in this area is a prime ministerial priority.  A mere fifteeen months from now the election campaign will be in full swing.

More importantly, market prices suggest that people transacting in the urban land market don’t believe it either.

There was another excellent illustration in this morning Dominion-Post as to why one would be foolish to put a high probability on such reform happening.   It appeared in the form of two articles, one with the (hard copy) headline of “Where will Wellington grow?”  and the other with the hard copy headline “Tough Choices”.  I’ll set to on side for now the point that with a sensible immigration policy, the abolition of corporate welfare and longstanding New Zealand birth rates the city probably wouldn’t be growing at all –  as I pointed out recently, it is not as if stellar productivity growth is some irresistible lure.     Wellington City Council can’t be held responsible for New Zealand population growth, so lets grant for the sake of argument that the population probably will keep on rising.

There are Labour mayors in all three of our largest cities. But it is worth recalling that the Wellington City Council is one the most woke-lefty outfits in the country –  if any council is well-aligned with the government it must be them.  It has a Labour mayor who surely has national political ambitions, several Green councillors, and deputy mayor who if she had her way would strip out all reminders of the Anglo heritage and culture of the bulk of the population, and even the councillors who are not from Labour or the Greens are mostly only a softer shade of pinky-green.  The same issue of the newspaper reports council officers questioning the “appropriateness and relevance” of street names in my own suburb, mostly named for various British and European rivers.  As I’ve noted previously, it must stick in the craw of councillors and their staff to have their offices on (Edward Gibbon) Wakefield St and (Queen) Victoria St and their (well, our) city named for the Duke of Wellington.

This is the opening of the article

City councillors are bracing themselves for a “nimby” backlash as a major plan to find space for 80,000 more Wellingtonians to live goes out for public consultation.

Councillors voted unanimously this week for their spatial plan to go out for feedback.

and goes on to note

The council’s spatial plan posits four scenarios that people will be able to provide feedback on: one centred on high-rises in the CBD, another focused on building upward in suburban townships, a third creating a new suburb in Ohariu Valley and a fourth scenario extending developments at some existing greenfield sites.

No sense anywhere of letting the market work, in response to the revealed preferences of prospective purchasers. No sense of getting the pricing right (for infrastructure connections etc) and then letting things develop in an evolutionary way. No, it is all a matter for councillors to choose, for councillors to “make space”.   And, of course, all led by the Council’s (Australian) Chief Planner.

One councillor notes that

councils were required by law to have a plan for expected growth and Wellington had “no choice” but to come up with a plan to accommodate the extra 80,000 people expected in the city over the next 30 years.

Perhaps, but why couldn’t that plan be, we will get the pricing right, we will allow for appropriate differential rating, we will build (or allow to be built) connections pretty much as required, we will facilitate intensification where local property owners are agreeable, and then let people and the market take it from there?  An abundance of competitive development opportunities – a superfluity –  is what keeps prices down.

That sort of approach might look something like the fine words from Phil Twyford. But not a single comment, from councillors or council staff, in the article suggests anything like that sort of mindset.

If the government were really serious about thoroughgoing reform, wouldn’t it have been an ideal opportunity to have sought to work with their ideological allies on the Wellington City Council to make it happen here – to actually lead the way and bring land prices back to something more like the value in the best alternative use?

Instead, we have the right-on Labour mayor, emphasising not choice, not facilitation, but his own ideological preferences, all supported by the bizarre rhetoric of having to “squeeze people in”, when Wellington City (let alone the greater Wellington region has abundant land).

When mayor Justin Lester is asked for the scenario he wants he just points up

As I understand it, he himself lives in a low-rise family home in a quiet suburb.  But apparently he thinks it is up to him to determine that many fewer of the next generation would have that opportunity.  His Chief Planner is clearly right behind him –  his distaste for a physical expansion of the city seeps through in almost every comment in the article.

It is a democracy, and too much power in such matters rests with councillors and their staff.  My point here isn’t so much to champion an alternative model –  much as I would support one –  as to make the point that anyone who doubts the government is serious about thoroughgoing reforms and significantly reducing land prices in and around our cities, need only look to the lead being provided by the government’s close ideological allies at the Wellington City Council.

As the Dominion-Post articles suggest, there is likely to be lots of blowback against the options preferred by the council (intensification and more intensification) and so in the end whatever gets approved will be some sort of lowest common denominator.  There will be more houses built over time –  as there have been in fast-growing cities around the country in the last 30 years –  but never enough land-liberalisation to ever create a sustainable rational expectation that future land prices in and around our cities will be materially lower than they are today.

Perhaps one day reform will really happen, and prices really will sustainably adjust.  But, as yet, there is nothing in the wind –  whether from the Prime Minister, or Labour mayors or Labour/Greens councils – to suggest it will occur on this government’s watch.  And the young and the poor  (especially the young poor) will be the ones who pay the price, in lost opportunities.

Xinjiang: an opportunity for Ardern and Bridges

On my way home this afternoon I listened to an interview, in the Sinica podcast series (on all sorts of matters Chinese), with Nury Turkel, chairman and founder of the Uyghur Human Rights Project.  For anyone at all interested in the subject it is well worth listening to.

As the interviewer himself put it, he is someone who is not generally seen as anti-PRC, and indeed regards himself as still being listened to to some extent by some of the more strongly nationalistic/pro-PRC people.  But he is clearly appalled at what is going on in Xinjiang, initiated and executed by the regime in Beijing.

In the programme notes there is this summary

6:44: Nury calls for a larger international coalition to decry the horrors in Xinjiang, and highlight the shadow that Uyghur internment will cast on the longer history of China, stating, “In the end, we want two things. One, we want the camps to be shut down. It’s an embarrassment to the Chinese people, even in their history. It needs to be shut down. And, two, we want to be able to restore the Uyghur people’s basic dignity. Give them their dignity and respect back.”

In the course of the discussion it was noted that while Beijing is not generally that receptive to international criticism and pressure at all,  some people are more likely to be listened to –  or be awkward for the regime – than others. Hardline permanent anti-Beijing hawks are easily brushed off.

But people, institutions, and countries that have toadied to Beijing at every turn are a different matter.  Much as I am critical of Jacinda Ardern and Simon Bridges I don’t believe either of them is likely to be comfortable with the atrocity that is Xinjiang.    Fairly or rationally or not, the Prime Minister now seems to carry with her  –  perhaps internationally even more than at home – some sort of halo of kindness, decency etc.  That image etc surely carries some responsibility.

New Zealand doesn’t matter much in the scheme of things, but precisely because our main political parties and successive governments have been such toadies, it would not be nothing –  in Beijing or in the rest of the world – if Jacinda Ardern and Simon Bridges rediscovered some moral core, some courage, some decency, and were willing (together perhaps) to openly and publicly deplore what is going on in Xinjiang.   (They might add in the plight of Falun Gong, Christian believers, and so on too).  To call it as it is: a moral stain, and one that blights the reputation of any leaders who just walk past quietly, or make excuses  (Todd McClay) for the atrocity.

Fairly or not, it often isn’t the people who strongly opposed evil from the start whom history remembers most favourably, but those who once walked with the perpetrators of evil and then stepped away and spoke up early enough.   The evil in Xinjiang has gone on quite long enough, that no decent person should any longer be able to turn a blind eye.  That includes New Zealand’s sycophantic officeholders.

For anyone interested in learning more, Sinica has a monthly article on the situation in Xinjiang.

 

Fruit-pickers, wages, and immigration

I’m not one of those who thinks wage and salary earners as a whole have had some sort of raw deal.  From time to time I’ve run this chart

lci wages vs gdp

suggesting that over the last 15+ years, wage increases in New Zealand (it is different in some other countries)  have outstripped that rate of growth in what I (loosely) term the earnings capacity of the economy: nominal GDP per hour worked, a variable that incorporates productivity growth and gains in the terns of trade.

To the extent there is some sort of “raw deal”, it is one the public has put up with: voting for politicians who, in office, do nothing about removing th roadblocks in the way of fixing our poor rate of productivity growth.  Fix that and we’d be considerably better off.  But across the economy we can’t consistently pay ourselves what hasn’t been earned.

But if wages growth across the economy has been, if anything, surprisingly high given the lack of productivity growth (I say “surprisingly”, but there are decent explanations as to why it has happened), there are still some wages puzzles.

One of them perhaps only puzzles public sector economist types who’ve never themselves had to make a payroll or face a market test for their services.

The Reserve Bank has long run a regular programme of business visits.  I always enjoyed participating (especially in visits well away from Auckland and Wellington) and often came away from the visits with a heightened admiration for the people who have built and maintained businesses, through good and bad economic times.    But there was one question that I never really got a satisfactory answer to.  In periods when the economy was doing well (for example the early 2000s) we would regularly hear from firms we talked to that it was really hard to get decent staff.   We’d nod understandingly, jot that down in our notebooks, and then ask “so what is happening to wage inflation?’ and “so are you increasing the wages you are willing to offer to get people”.  And often there was a look of almost incomprehension (perhaps it was really disdain for Wellington economists), and only rarely would anyone suggest that, indeed, it was really hard to get the right staff, and that they were paying over the odds to get people.  For some reason, a conversation on this issue at a firm in Timaru, probably in 2002, sticks in my memory.

There are strands to a possible good story.  Increase wages materially for new arrivals and before long you’ll have to increase them for everyone.  It is easy to raise wages and hard to cut them (if labour market or business conditions reverse).    Simply bidding more might attract a class of worker more likely to move on quickly if someone else offered a little bit more.  And so on.  So I get that there are reasons why wages move somewhat sluggishly (relative to, say, prices for oil or other commodities).  But I was always surprised at how weak a link managers/owners of private businesses appeared to draw between difficulty hiring and (what an economist would think of as) putative changes in the market-clearing price for such labour.

Which is all by way of introduction to a Stuff story I noticed yesterday about an industry having difficulty getting staff.   I’ve written previously about bus companies and bus drivers, and the bizarre situation in Wellington where the contracted companies get away with endless cancellations (with apparently minimal penalties) because they choose not to pay what it would take to employ the necessary number of drivers.  One might grant that that is a difficult situation –  a government-controlled “market”, in which both fares, operators, and service frequency are all supposed to be simultaneously controlled.

But yesterday’s article was about jobs in a fully private sector industry, with lots of individual employers, and with a significant export orientation: fruit-picking, including “grapes, apples, and kiwifruit”.  The article is quite a substantial piece, including a couple of quotes talking of a “dire” situation finding staff, and repeatedly talk of severe labour shortages.  And, remarkably, not one mention of wage rates.   It must not have occurred to the journalist to ask, let alone to the various employers (and employers’ representatives) to mention it.    Even though, when there is a “shortage” of tomatoes, tomato prices rise –  so that actual quantitity demanded at the going price is roughly equal to the actual quantity supplied.  At present, there is a “shortage” of avocadoes –  it gets a line perhaps somewhere in a newspaper, but prices adjust and so do (potential) consumers.

But not, it seems, in the fruit-picking industry.

The industry seems to think this is a problem for the government (admittedly, this is an approach fostered by successive governments, who also seem to think it is a “problem”, rather than (say) an opportunity for individuals who could capture the premium prices growers might otherwise pay to ensure their fruit was picked).  The article includes a quote from the head of something called the “Central Otago Labour Market Governance Group”, a title that sounds as if it could have been derived from some centrally-planned eastern European economy in the 1950s.

Perhaps there really is some movement in market rates for fruitpicking and the journalist just forgot to tell us. But if so, you’d have thought the industry representatives would have been keen to get the message across –  apart from anything else, it would be free advertising to people in those districts with a bit of time on their hands that there was (unexpectedly good) money to be had.

But again I’m left with a bit of a puzzle –  and perhaps it is only one to city-based macroeconomists – as to why a competitive bidding process isn’t at play.  One can understand the Wellington bus companies not raising wages (temporarily or permanently): they don’t have to, the passengers (mostly) bear the consequences, and entry to the business (Wellington bus routes) is restricted.  But for an individual grower (apples, grapes, kiwifruit or whatever), the situation is surely a lot different.  If there is a incipient shortage of pickers for the whole industry, that doesn’t mean your orchard has to miss out.  Offer better wage rates and presumably people will choose your orchard over another one down the street (on the other hand, choose not to compete and you risk fruit rotting on the tree/vine).  Of course, that invites the other orchards to increase their rates too, but that is how markets work.  And yet, if this Stuff story is to be believed, it doesn’t seem to be happening.  And that is even though much of the picking workforce seems to be itinerant or with no established and committed long-term relationships.  It isn’t obvious why offering more to pickers this year –  if the harvest is particularly early, or particularly good, or labour “shortages” are particularly severe –  need entrench higher rates for all time.

In fact, of course, much of the article channels an ongoing industry push to avoid paying higher wages to New Zealanders to do the job (not just this year, but permanently) by using the immigration system.  You might think that the case for using immigrant labour at times might be stronger than otherwise if there was evidence that wage rates in this industry had been rising particularly stronly (employers putting their money where their mouth is).  But apparently the industry doesn’t see it that way –  and neither (one deduces from their silence) does our current left-wing government, despite its key support base including workers and trade unions.

We are told

Key visa reforms sought by the industry include removing the need for annual reviews once a three-year visa is granted, giving those on three-year visas a pathway to permanent residency if no New Zealand residents are available for the job, and reworking the labour market test to make it more aligned with the employment conditions faced by employers.

It is fruit-picking we are talking about here, not the most skilled of jobs.  And an immigration system that, we’ve been told for decades, is supposed to be skills-focused, contributing to a lift in overall productivity growth, in ways that would raise wage levels for everyone.

As a reminder, there will be few/no/inadequate numbers of New Zealanders offering to work in a particular sector when wages (and overall conditions) in that sector are no longer particular attractive.  In the 1970s presumably our fruit was picked, our old people’s homes were staffed, our supermarket checkouts were staffed, by New Zealanders (whether those of longstanding or more recent immigrants –  but you couldn’t hire people from abroad specifically to fill these modestly-skilled jobs, and in the process keep down wages in that specific sector).

I presume much of what is going on here is that many of these fruit-based industries just aren’t that internationally competitive at current exchange rates. It probably isn’t the case with, say, gold kiwifruit, but for some of the other industries it seems quite conceivable that the economics is pretty tight and it might not be worth being in business if they had to pay materially higher wage rates to pickers.   There are hints of that in the article

“The growers are starting to think whether they are going to invest money because they need to have assurances about labour. It is a bigger issue than probably it is given credit for.”

To which I guess I have two strands of response:

  • first, there are lots of industries that are no longer viable here based on old production technologies (try making a living milking 50 cows by hand) or running a suburban petrol station (in my suburb there were four forty years ago and there are none now).  There might be issues of scale to consider, and/or investment in technology-based solutions, and
  • second, the real exchange rate (averaging more than 20 per cent higher since about 2003 than it did in the previous two decades, despite feeble economywide productivity growth) is a real symptom of the severely unbalanced New Zealand economy.  As a result, our export/import shares of GDP have been shrinking, not rising.    But however attractive the immigration option genuinely looks (and locally is) to an individual employer, on a large scale it exacerbates the economywide problems, not eases them.   For outward-focused industries in particular, a much lower exchange rate –  which would follow directly from substantial permanent cuts in immigration –  would improve NZD returns, and would also make producers in those industries better placed to bid competitively for New Zealand workers to fill their vacancies (or to invest in technological solutions, or the sort that help lift average labour productivity).

Firms simply shouldn’t be able to use immigration to fill positions requiring only modest skills or training without at least being able to demonstrate that the wage rates they are paying for such skills have run well ahead of other wage rates for several years.  But to get bureaucrats and ministers out of the business of picking favoured sectors/firms –  at present, the rewards to lobbying seem quite high – I continue to commend to anyone interested my model for temporary work visa policy.   It is pretty simple

Institute work visa provisions that are:

a. Capped in length of time (a single maximum term of three years, with at least a year overseas before any return on a subsequent work visa).

b. Subject to a fee, of perhaps $20000 per annum or 20 per cent of the employee’s annual income (whichever is greater).

If apple-growers really can’t get workers locally, and are happy to pay a substantial fee to the Crown, on top of a decent wage, I guess I’d be okay with temporary overseas recruitment.  As it is, they seem to simply want to undercut potential returns to New Zealand labour.

Three totally unrelated items

Rather than clutter in-boxes with three separate shortish emails.

First, a follow-on from yesterday’s post about house prices. I noted that the absence of any real sign of falling land prices in and around our cities suggests that the (admirable) words around possible reform from the Minister of Housing are not being treated as credible. Asset markets typically incorporate expectations about future changes in factors that might affect prices in the relevant market.

I had a brief exchange in the comments to that post with Eric Crampton of the New Zealand Initiative, and I see that Eric has now set out comments along those lines in a post on his own blog.

Eric’s key point is that it is hard to short houses. That is quite true, but not (I reckon) determinative. There is no traded derivatives market (eg a futures contract on the QV index, whether nationally or regionally), and although someone who would naturally own one house can sell that house and rent for a few years, it isn’t easy or cheap to do so (actual transactions costs are non-trivial, it is often hard to get a secure long-term rentals, many people have ties to specific neighbourhoods etc). Of course, many holders in other markets are pretty passive too – you can short US equities (say) but a huge proportion of holders are either in passive index-following funds, or in funds that allow only small deviations from benchmark.

But, to get back to the land (and housing) market in New Zealand. If hardly any suburban owner-occupiers (like Eric or me) are going to sell and rent, even if we believed – as Eric seems to – that substantial reform really is coming, there are plenty of other market participants, and it is the marginal choice that will drive the price. Young people starting out can make a choice to hold off buying for a few more years (they are already renting, so have no new transactions costs). Older people looking at trading down can bring forward that move by a year or two. And probably more importantly still, marginal players often aren’t owner-occupiers (actual or potential at all).

If, as someone owning rental properties, you believe the government is really serious, and change is really coming (in fact, even if you only believe it with a 50 per cent probability), you face a high chance of a large fall in the price of your asset over the next few years. A rational response to that expectation would be to sell now – to get out while the going is still good. If you had a bought a few sections in the outer suburbs thinking you might develop them a few years from now, if you believe the government is serious and change is coming, you would want to offload your land exposure now. And – for the really serious players – if you hold pockets of land, large or small, on the periphery of major cities, and have seen the value of that land sky-rocket as population growth and regulatory scarcity rewarded you, any serious prospect of a change in regime, in which peripheral land might once again go for something like its best alternative (farming) use, would surely see you reassessing now.

None of these effects are as instantaneous as (say) the fx market’s response to a Reserve Bank OCR announcement, or even the stock market’s response to possible corporate tax cuts, but they are real and efficacious mechanisms which we should expect to see already at work if the Minister’s plans are likely to be the real deal. Sure, if his speech to the New Zealand Initiative two weeks ago changed expectations – and it certainly impressed some people, including me – we won’t yet see the results in the data (house price data is at best available monthly, and decent land price data is even harder to come by). But that won’t be a credible story as the months roll by.

Of course, in any such experiments with non-instantaneous effects, it is hard to untangle precisely what part of any price movement is due to the specific factor one is trying to isolate. But if these reforms are really the big event the Minister suggests (recall that the aim was to “flood” the urban land market), the effects should be pretty apparent pretty soon (especially with a slowing economy, easing migration, extended brightline tests, ringfencing, talk of CGTs, tighter credit conditions and so on). I remain pretty sceptical, less (as I noted yesterday) because I doubt Phil Twyford’s intentions, than because I doubt the commitment of the government as a whole (the PM in particular), or its interest in actually seeing land and house prices fall materially.

My second item related to the Reserve Bank.  Yesterday, there were two emails from the Bank.

The first was this press release

pac c banksThis from an organisation that claims it is underfunded.  “Fostering investment in green technology” simply is no part of the Reserve Bank of New Zealand’s mandate.  Nor, to be blunt, does the Reserve Bank have any obvious expertise.

Perhaps I should be encouraged to learn that the Governor is going to focus on lowering the cost of capital in New Zealand (bearing in mind that our real risk-free interest rates have long averaged the highest in the advanced world), but I don’t suppose that is what he meant.

And the second email from the Reserve Bank was this

capital

I guess it is better than not publishing the material at all, but this new 65 page document is finally released more than 3.5 months since the consultation document, setting out the Governor’s plans, was published, and with only a month until submissions close.  I haven’t yet read it, but someone who has tells me that it still doesn’t deliver a proper cost-benefit analysis, and only promises that they will do one one day –  probably after the final decision has been taken, to provide support for whatever the Governor settles on.

This is no way to make policy on serious matters.  Meanwhile the Governor cavorts with his tree gods and dabbles in things –  green technology just the most recent example –  that are no responsibility of his.

Thirdly, and finally, why is the case of Shane Jones (Associate Minister of Transport), the Northland trucking company (owner by a donor and distant relative), the NZTA, and the prosecution, not leading all media outlets?  Why is the Prime Minister not fronting up and facing hard questions about acceptable conduct in her Cabinet?   Appearances of impropriety should not be tolerated, let alone substance.

Matthew Hooton’s tweet seemed apt

Reminding ourselves that Transparency International is itself largely government-funded.