The inflation failure
Professor Robert MacCulloch writes:
Look at the document below which I found in the government’s files – its says that inflation in NZ is to be held at 1 to 3 percent over the medium term and is signed off and “agreed by” the Finance Minister and Reserve Bank Governor:
That would be Grant Robertson and Adrian Orr.
Yet on Budget Day yesterday, Treasury released its inflation forecasts which are HIGHER than 3% for 2022, HIGHER than 3% for 2023 and HIGHER THAN 3% for 2024. It was also over 3% this past year, 2001. Yes this inflation is not temporary, it is not “transitory”. New Zealand will NOT be achieving its agreed inflation target, not even remotely, over the “medium term”. My question is: since when can a Finance Minister and a Reserve Bank Governor put their signatures to an “agreed” course of action, then willfully ignore it? In monetary economics, we call it a loss of credibility.
This is a key point, that media should focus on more. The Government is projecting inflation will be higher than the top of the allowable band for at least four years.
The inflation rates are:
- 2021: 3.3%
- 2022: 6.7%
- 2023: 5.2%
- 2024: 3.6%
Over four years that is a cumulative inflation rate of 20.1%.
Yet no one is resigning.