A war of words has broken out over the Reserve Bank, with National calling for a pandemic-period monetary policy inquiry and Finance Minister Grant Robertson hitting back by describing Christopher Luxon as “captain hindsight”.
The fight as Parliament resumed came courtesy of an essay written by Reserve Bank governor Adrian Orr’s predecessor Graeme Wheeler and economist at the New Zealand Initiative Bruce Wilkinson.
In the essay – highly unusual for an immediate former central banker in New Zealand – Wheeler lashed his successors for running ultra-loose monetary policy and accused central bankers around the world of being far too confident in their ability to manage inflation.
On the back of the report, the National Party has called for an independent inquiry into the Reserve Bank’s monetary policy response from March 2020 until late 2021 “to better understand the lasting impact of key decisions, the length of stimulus and any lessons that can be learned for the future”.
Finance Minister Grant Robertson says it is the responsibility of the Reserve Bank and its board to look at the bank’s performance.
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National hopes it will open a new front in its cost-of-living fight with the Government.
The party said while it fully supported Reserve Bank independence, it expected an “independent” review be instituted prior to the reappointment of Orr, or the appointment of a new governor.
In a statement released on Tuesday, Orr responded that the critique “will be considered as part of our public Monetary Policy Remit review process underway.”
“The decisions of the Monetary Policy Committee are always made with the information at hand at the time. This information and the assumptions made at each decision point are outlined for all to view in our Monetary Policy Statements,” Orr said.
“We are a learning institution, and through the open process of the Remit review and the monetary policy review, we will be very clear on our lessons learnt as we forever seek to do a world-class job for the people of New Zealand,” Orr said
Robertson dismissed the proposal as a political stunt and said reviews had already been completed and were under way.
“My response to that is that ‘Captain Hindsight’ Mr Luxon needs to remember what he and his party said in that period of time. Most New Zealanders supported the reasons that we had to intervene both at a fiscal and monetary policy sense.
“More broadly, it is the responsibility of the Reserve Bank and indeed their board to look at the performance of the bank. I will not be instituting a further review.”
ROBERT KITCHIN/Stuff
National Party finance spokesperson Nicola Willis and leader Christopher Luxon at the Caucus Run on Tuesday morning.
Significantly, the National Party has tied its criticism of Orr to his reappointment, arguing it would not be comfortable with Orr being recommended without an inquiry first being conducted. New rules introduced by Robertson require the Opposition to be consulted on the appointment of a new RBNZ governor.
“Our point is simply that it’s not sufficient for the Reserve Bank to mark its own homework, that there should be an independent appraisal of the decision-making,” National’s finance spokesperson Nicola Willis said, referencing the bank’s Monetary Policy Remit review process, currently under way.
ACT leader David Seymour also joined the fray, but went further than National in saying his party had no confidence in Orr.
“If you read the Monetary Policy Committee remit, and compare that with David Caygill’s first policy targets agreement in 1990. It used to say ‘get inflation to this level by the time or will review your position’. The current monetary policy remit has no concrete, measurable targets.”
John Hawkins
Graeme Wheeler, the former Reserve Bank governor, in 2016.
While both Willis and Seymour agreed that the RBNZ’s actions were also shared by many other central bankers around the world, Willis said that fact “shouldn’t mean that New Zealand doesn’t seek to be the best”.
“Central bankers have failed around the world. But it’s not good enough to say that, to let our central bank off the hook just because others screwed up, too,” Seymour said.
The essay co-penned by Wheeler, who was not known for fronting media or being very comfortable with criticism during his term as governor from 2012 to 2017, was not primarily aimed at the RBNZ, but central banks more generally.
Every living former Reserve Bank governor, with exception of Alan Bollard, has now criticised Orr in some form or another. When contacted by Stuff, Bollard said he did not comment on the current conduct of monetary policy as a matter of principle.
Supplied/Stuff
National says it expects an “independent” review be instituted prior to the reappointment of Reserve Bank governor Adrian Orr, pictured, or the appointment of a new governor.
In Australia, where inflation is running at 5.1%, but grew 2.1% in the past quarter, newly elected Labour Treasurer Jim Chalmers also initiated a “wide-ranging review” of the Reserve Bank of Australia’s operations last week.
The review will explore the Australian central bank’s “objectives, mandate, the interaction between monetary, fiscal and macroprudential policy, its governance, culture, operations, and more”, Chalmers said.
The Government announced a review of the RBNZ that began in 2017 and has resulted in a restructuring the banks’ governance, including its monetary policy committee and board over the past several years.
Orr did not respond to requests for comment.
Clarification (published 9.52am July 27): An earlier version of this story did not include comments from a statement released by Reserve Bank Governor Adrian Orr. This was an accidental oversight. Some of Orr’s comments have now been included.
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