There’s a new Govt, someone tell the Reserve Bank
We voted to kick out one of the most incompetent governments, but Labour appointees are still making decisions.
The chairman of the Housing Authority, the former trade union secretary and Labour MP, Mark Gosche, has tended his resignation but remains on the board.
The coalition Government has made one appointment to the Housing Authority.
Fulfilling an election promise for an independent wide-ranging inquiry into the response to the Covid pandemic the terms of reference are being reviewed. The Labourappointed commissioners remain. The chairman, Professor Tony Blakely, has opined in an article in the
British Medical Journal that Labour’s strategy of elimination was probably the “optimal” response.
Last week a decision was made solely by Labour appointees that could well decide the fate of the Government.
The Reserve Bank decided to keep the Official Cash Rate, at 5.5 per cent.
National and Act campaigned to make controlling inflation the Reserve Bank’s sole task. Parliament has legislated to remove the bank’s dual remit of inflation and employment to make controlling inflation the bank’s remit.
The Reserve Bank governor in his post-OCR briefing was asked if the change in the bank’s remit had influenced the bank.
The governor emphasised that despite the alteration in the bank’s remit, it did not sway their decisionmaking process.
The Government has not got a single appointee on either the board or monetary committee.
The governor is appointed by the board on the recommendation of the finance minister.
Grant Robertson reappointed the governor for five years. Last year the finance minister extended the term on the monetary committee of Peter Harris, the trade union economist.
There is a refusal in Wellington to accept that the coalition won the election and has a democratic mandate.
It could be the Reserve Bank is correct, and inflation will be 3 per cent this year and 2 per cent next year.
What is indisputable is that the bank could also be wrong. In my opinion, a Reserve Bank whose sole remit is inflation would have increased the OCR for the reasons set out by the ANZ Bank’s economists.
The Reserve Bank is placing a lot of reliance on a survey of 38 business leaders who told the bank that they believe inflation will fall. Did the survey include Air New Zealand, which has announced an intention to increase fares?
What about councils that are planning double-digit rate increases?
Last week’s OCR decision is not going to make any business reconsider its pricing intentions.
The February ANZ-Roy Morgan Consumer Confidence survey found most of us believe inflation will be 4.5 per cent next year. A belief that will influence wage expectations.
One of the reasons the Reserve Bank failed to control inflation is Labour had its foot on the accelerator. The bank says it is waiting to see the May budget before assessing this government’s fiscal policy. I know of no economist who believes that just asking departments to spend less will rein in spending. Borrowing and spending is inflationary regardless of who is in government.
The Bank did not assess whether the coalition’s intention to cut income taxes will be inflationary. Tax cuts without corresponding expenditure cuts or extra revenue is inflationary.
The Kiwi dollar fell on the OCR announcement. A lower Kiwi means higher import costs.
The inflationary risks are high.
It is nonsense that political appointees are entitled to serve out their term.
As Minister for SOEs, I made more appointments than any other minister. I never hesitated to ask for, and get, resignations.
It is common practice in the US for all high-level political appointees to tender their resignation the day a new president is inaugurated.
Our Government must write to all political appointees requesting their resignation. Not all should be accepted. The Reserve Bank is an exception. For four years the bank has failed to meet its remit of keeping inflation below 3 per cent. In my opinion, the governor, monetary committee and board should all go.
Ministers need to ask themselves, “is it more important that they keep their jobs or that the governor of the Reserve Bank keeps his job”?