Symbolism, apostasy and shambles - in a day
The local bank economists shrugged. Hold the presses. Former National leader and our first post-reform Reserve Bank governor Don Brash seemed unperturbed.
And Finance Minister Grant Robertson did a spot of downplaying of his own, talking about his planned changes to the Reserve Bank’s mandate as ‘‘in line with other central banks in the world’’.
In the context of the first two days of a new Parliament and the shemozzle around the election of the Speaker – more of that later – the reform and review of the central bank’s role caused barely a ripple.
Of course it has long been Labour policy, and Robertson outlined it to muted fanfare back in April. So there were no major surprises to unpick.
Those who did discuss the ‘‘dual mandate’’ created by adding ‘‘maximising employment’’ to the existing price stability target pointed out that the central bank – and probably any central bank – already take into account employment and unemployment when making their calls on monetary policy.
They are probably right that in the short term, and in most situations, the change will make little difference.
All the same, there is potentially a significant difference between simply taking employment and unemployment into account when you are setting the official cash rate and actually targeting maximum employment. One is an input into a decision, combined with a likely reaction. The other is a desired outcome of a decision.
That might sound like a dance-on-thehead-of-a-pin distinction. But after 30 years of central bank orthodoxy, with
The test of whether the pudding tastes any different will come the next time the bank is faced with the need to choke off inflation when unemployment is high and rising.
New Zealand in the forefront of change back in the 1990s, it is a signal moment for Prime Minister Jacinda Ardern’s new administration. The test of whether the pudding tastes any different will come the next time the bank is faced with the need to choke off inflation when unemployment is high and rising.
If the local commentators were phlegmatic, UK economic guru Ambrose Evans-Pritchard, the International Business Editor of the newspaper, was far more excited anticipating the change.
Ahead of the formal announcement by Robertson, he described it (favourably) as ‘‘apostasy’’ that marked the end of the ‘‘global central bank era’’.
He said the ‘‘cult of inflation targeting began in New Zealand in the late Eighties. We may date its demise to a remarkable ideological pivot in the same country thirty years later, and with it the end of central bank ascendancy across the world’’.
‘‘Premier [sic] Ardern is the canary in the mine,’’ he added. ‘‘The global axis is shifting.’’
That might be a bit over the top, given inflation held in the 1-3 per cent band remains at the heart of the regime. But he is in the right ball-park when it comes to the symbolism of the move.
From the Government’s point of view, adding employment overtly to the bank’s thinking does fit into a broader narrative.
As Ardern put it in the Speech from the Throne, delivered by GovernorGeneral Dame Patsy Reddy, it is an ambition ‘‘to move beyond narrow measures and views of value and broaden the definition of progress. The economic strategy will focus on how we improve the wellbeing and living standards of all New Zealanders’’.
But symbolism cuts both ways. Which is why the confusion and chaos in the House on Tuesday over the election of Speaker Trevor Mallard – and the stunning photos of concern and conflict displayed in the media – would have cut Labour deeply.
For all that Ardern and Leader of the House Chris Hipkins argue they had the numbers to elect Mallard (they did) it beggars belief that they were confident of that fact.
Just hours after it was refusing to engage with National over its plea to increase select committee numbers, the Government was caving in on the floor of the House and shaking hands on the deal. The symbolism was unmistakable. Here was an experienced, monolithic Opposition wrong-footing a three-headed Government apparently uncertain of the most basic parliamentary reality; the numbers in the House.
Even so there are some myths being created alongside the symbolism.
The first is that somehow a deal agreed in the last Parliament to cut the number of select committee slots to 96 should be set aside in light of the new parliamentary make-up.
(Ironically the change was agreed unanimously and moved by the current shadow leader of the house Simon Bridges, the same man who is so loudly denouncing it now as a breach of democracy.)
Yet the relative size of the Government and Opposition has not changed materially – from 63-58 before the election to 63-57 now.
As the Standing Orders Committee, vintage July, 2017, noted: ‘‘We propose ... a target of 96 seats across the 12 subject select committees. We considered models based on 108 committee seats, which would have little impact given the decrease in the number of committees, and 84 committee seats, which would leave too many members without permanent committee seats –a matter considered below. A total of 96 seats will result in most committees having seven, eight, or nine members.’’
So it should also be borne in mind that the deal suited both parties.
Why?
Because Labour and the broader opposition parties were struggling to cover so many select committee slots.
On the Government’s side it also meant ministers had to sit on many committees to maintain majorities.
On that score the increase from 96 to 109 slots will not alter the balance of power inside the committees.
It simply means ministers will again be rostered on to select committees.
National may have scored a symbolic hit on the Government, but it has set back useful reform of the committees.
And that was just day one of the new Parliament.