Hickey on the Reserve Bank
Bernard Hickey writes:
In an unprecedented move in the modern history of our political economy, finance minister Grant Robertson yesterday defied the publicly stated objections of the opposition and reappointed Adrian Orr as Reserve Bank governor for a full second five-year term, effectively destroying what remains of the bank’s record since 1989 of it being seen to be politically independent and above the partisan politics of the day.
That 33-year-long era of neither major political party either publicly attacking the bank or expressing a lack of confidence in its governor is now over, leaving financial markets to hope that if National-Act is elected next November that Orr either stands down immediately, or is dismissed and replaced without too much fuss before he has to make any big decisions that clash with the new government’s views.
National tried to avoid this scenario by proposing a one year extension to allow the next Government to consider the issue. But Robertson has appointed Orr through to March 2028 – past the 2023 and 2026 elections.
The Reserve Bank’s decisions essentially added $1 trillion to the wealth of home-owning households and it was clear in public to everyone except the Reserve Bank, Treasury and the finance minister’s office.
The repeated denials that anything much had changed or was wrong became laughable. A range of Treasury and Reserve Bank papers even went so far as to say it was not clear that quantitative easing had widened inequality, even though both Robertson and Orr were advised in those frantic days at the beginning of covid that QE would make the wealthy much wealthier.
The refusal of both Adrian Orr and Grant Robertson to acknowledge any mistakes or publicly have any regrets has been the final straw.
They’re still trying to blame everything on others.
The moment it broke in public was earlier this year when inflation refused to cooperate with the plan and blew out to 7.2%. It is not expected to get back down into the legislated and agreed target range of 1-3% for another couple of years.
The Reserve Bank’s recent annual report and statement of intent don’t even mention the failure to hit the bank’s inflation target. It’s as if it never happened. It also wasn’t mentioned in Robertson’s reappointment letter.
Incredible – not even a mention of their biggest failure!