Damien Grant
Central Bank governor Adrian Orr has joined the growing Greek chorus for the government to abandon its fiscal prudence.
In a speech last month he made the point that we face a happy trifecta of low interest rates, infrastructure gaps and a sound Crown balance sheet.
‘‘Now is a good time to get ahead,’’ he declares happily.
Orr is wrong on this as he is on monetary policy. He may not have noticed, but our economy is going rather well. Better than predicted.
It’s defying the doomsayers and gloom merchants, of which I am one, who have been predicting an economic collapse for a year now.
When the wheels fall off our boy-racer economy we will not have monetary policy to soften the landing, thanks to Orr and his predecessors, who have failed to deliver the unpleasant medicine of rising interest rates during the past decade of economic growth.
Rather than admit to this failure, he repeats the new Central Bankers’ mantra: ‘‘Monetary policy needs friends’’.
Indeed it does. So do the Kurds, but needing friends and having them are two different things.
In the same speech that he talks up the desirability of debtfunded infrastructure spending the Governor makes the point that our current economy faces capacity constraints.
Firms are struggling to find workers. We are at full employment. Which, even a second year economics student will be able to explain, creates a problem if the government begins a massive spending drive.
Crowding Out isn’t a Te Awamutu rock band. It’s a simple economic concept.
If the government uses a resource then the private sector no longer has access to it. If
Crowding Out isn’t a Te Awamutu rock band. It’s a simple economic concept.