Danger Will Robinson, danger

October 14th, 2013 at 2:00 pm by David Farrar

The ODT reports:

However, Mr Cunliffe said today he had an “open mind” about whether the OCR should instead be set by a monetary policy committee.

He told TV3′s The Nation there were some good arguments for a monetary committee – including that a range of views would be on the table when decisions were made.

Mr Cunliffe said the matter was being considered by Labour’s shadow finance minister, David Parker, and any decisions would be signalled before next year’s election.

One point of detail to consider was whether the committee should have external members representing the likes of unions and exporters.

“If you had someone like a leader of one of the main business lobbies or a manufacturer or an exporter, then they would have a first-hand understanding of the impact of overvalued exchange rates on exporting, which is a critical issue for New Zealand.”

He denied a monetary committee would be a radical change, saying it would still make independent decisions subject to the objectives of the legislation.

An internal committee would not be a radical change, and could be beneficial.

A committee where the Government appoints union mates to it, so they can gerrymander interest rates to give economic growth a short-term steroid type fix, is a radical change and absolutely undermines the independence of the Reserve Bank.

Is there anything off the table in terms of pay off for unions? Giving them a vote on setting interest rates is madness. Totally against that. Also against a business lobby having a vote on interest rates.

Saying such a move would leave the bank independent is Orwellian double-speak.

Tags: ,

45 Responses to “Danger Will Robinson, danger”

  1. burt (7,793 comments) says:

    Is there anything off the table in terms of pay off for unions?

    The funding arm of the parliamentary Labour party have always had control of the puppet leaders. It’s the golden rule – he who has the gold makes the rules….

    It’s just a shame the top 1% of earners are funded by the lowest paid workers and that is called “workers rights”.

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  2. All_on_Red (1,336 comments) says:

    National had their chance. Only persons registered on the Electoral roll should be able to donate to Political Parties.

    Vote: Thumb up 2 Thumb down 8 You need to be logged in to vote
  3. gazzmaniac (2,317 comments) says:

    All_on_Red – if they did that then the Nats would get no donations either.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  4. Longknives (4,411 comments) says:

    Can we all have a big house in Herne Bay like you Comrade Cunliffe??

    Vote: Thumb up 16 Thumb down 1 You need to be logged in to vote
  5. burt (7,793 comments) says:

    All_on_Red

    And if National did that Labour would do what they have always done and say the law was confusing and it’s not fair to just punish them – They they would say the AG made a bad call and the letter they ignored from the Chief Electoral Officer was of no consequence. Parliament would need to go into urgency and retrospective validations would be passed covering 14 years – The really sad thing though – supporters would claim it was fair because they want their dear leader in office….

    Nothing has less principles than a lefty wanting power and access to other peoples money !!!!!!!

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  6. bhudson (4,734 comments) says:

    He also pointed out that his view is that the govt can amend the objectives in the Act to its heart’s content and still claim that they are not interfering with the RBNZ’s independence.

    So they could take what are deliberately broad macro-economic objectives – an inflation band and price stability – and impose detailed political policy (such as excluding 1st home buyers from LVR requirements) and Cunliffe believes that that would not impact on the RBNZ’s independence.

    Cunliffe is clearly a master of Orwellian ‘double speak’

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  7. thePeoplesFlag (170 comments) says:

    “…Giving them a vote on setting interest rates is madness…”

    Because the GFC was a stroke of business genius? The banksters and their mates have right royally fucked things up.

    Maybe it’s time to give people who actually represent real workers a say, They couldn’t do any worse.

    Hot debate. What do you think? Thumb up 2 Thumb down 27 You need to be logged in to vote
  8. burt (7,793 comments) says:

    Maybe it’s time to give people who actually represent real workers a say, They couldn’t do any worse.

    Don’t hold your breath waiting for the Chardonnay socialist Labour people to stand aside …. They are too busy spending the money from low paid workers on their advertising – while pocketing their top 1% salaries.

    Vote: Thumb up 10 Thumb down 1 You need to be logged in to vote
  9. TooRight (3 comments) says:

    Who would have thought the Reserve Bank in setting interest rates was not acting as a monetary policy committee.

    Cunliffe and Parker are Absolute Bankers.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  10. Tom Jackson (2,458 comments) says:

    How are we supposed to take central bank independence seriously when Don Brash used to be the governor here, and Ayn Rand acolyte Alan Greenspan in the US? It would be hard to find two more hardcore partisans.

    Central bank independence is not sacrosanct, and trying to pretend that it is is just political partisanship. To be perfectly honest, I would support having representatives of manufacturers on a committee. In fact, I think it would be mandatory.

    We’ve had a long time with the current set of policies and it hasn’t worked. Time for new ideas.

    Hot debate. What do you think? Thumb up 2 Thumb down 25 You need to be logged in to vote
  11. Peter (1,577 comments) says:

    When Labour do it, it’s good. Because when Labour does something, it’s good. Therefore, it’s good, because Labour do it.

    Don’t question The Messiah, comrades.

    Vote: Thumb up 11 Thumb down 1 You need to be logged in to vote
  12. Tom Jackson (2,458 comments) says:

    Economic philosophies change every 30-40 years or so. We’re due.

    Vote: Thumb up 2 Thumb down 17 You need to be logged in to vote
  13. Alan (1,055 comments) says:

    So democracy is good when it delivers things you like, such as fluoride in water, but bad when it may deliver things you don’t.

    Parliament is sovereign and if in the future the people of NZ elect an administration that changes the functions of the Reserve Bank Act, it’s their right to do so.

    The Reserve Bank Act as currently worded wasn’t carried down from Mt Sinai by Moses. Parliament created it, Parliament can alter or repeal.

    Vote: Thumb up 5 Thumb down 1 You need to be logged in to vote
  14. mikenmild (10,618 comments) says:

    Central bank independence is a bit of a myth. The government appoints the Board of the Reserve Bank and the board in turn recommends a governor for appointment. It is easy enough to influence the Reserve Bank through board appointments or the policy targets agreement. It is a question of what type of fig leaf is preferred.

    Vote: Thumb up 1 Thumb down 12 You need to be logged in to vote
  15. Tom Jackson (2,458 comments) says:

    Imagine the wailing if Paul Krugman, a moderate Keynesian was made chairman of the Fed or the apoplexy if a Marxist was appointed.

    Yet, Greenspan was regarded as a sensible choice by the commentariat. The guy is a Randroid.

    Vote: Thumb up 1 Thumb down 13 You need to be logged in to vote
  16. srylands (386 comments) says:

    “Tom Jackson Says:

    “We’ve had a long time with the current set of policies and it hasn’t worked. Time for new ideas.”

    Look at “Fig 2 — Inflation since 1970″

    http://www.rbnz.govt.nz/statistics/key_graphs/inflation/

    It hasn’t worked? Really?

    Vested interests do not act in the national interest. Neither do fools like you.

    Vote: Thumb up 18 Thumb down 0 You need to be logged in to vote
  17. Jman (84 comments) says:

    Another alternative is to adopt the Taylor rule:
    Set the OCR to 8.5 + 1.4*(Core inflation – unemployment rate)
    Having a rule, rather than the discretion of a human being makes it non-political and completely transparent.

    http://en.wikipedia.org/wiki/Taylor_rule

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. greenjacket (415 comments) says:

    Cunliffe: “If you had someone like a leader of one of the main business lobbies or a manufacturer or an exporter, then they would have a first-hand understanding of the impact of overvalued exchange rates on exporting…”

    Does Cunliffe not understand that the main business lobbies, manufacturers and exporters have diverse and often conflicting views? The Manufacturer’s Association has a completely different set of priorities from, say, Federated Farmers. Even within just one sector, Fonterra have totally different priorities from, say, Silver Fern Farms. Exporters even differ on whether the exchange rate is “over valued” or not – for example, exporters to China have a completely different view from exporters to the USA.

    This confirms for me that Cunliffe is either ignorant about manufacturers and exporters, or else he just makes shit up.

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  19. Manolo (13,327 comments) says:

    The socialist crooks are pondering the next bribe already.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  20. Pete George (22,754 comments) says:

    “A Labour government will revitalise our manufacturing and export industries and breathe life back into provincial New Zealand. We will be a hands-on government which will work with regional New Zealand to get the best out of our provinces.

    “A Labour government will harness our innovation potential and can-do attitude by funding research and development and creating a value-added economy which benefits all New Zealanders,” David Cunliffe says.

    http://www.voxy.co.nz/politics/census-shows-regional-exodus-under-nats-cunliffe/5/170781

    With specific solutions like this we will be saved.

    Vote: Thumb up 1 Thumb down 6 You need to be logged in to vote
  21. MT_Tinman (2,985 comments) says:

    Oi Cunners!

    Bugger this shit. Get to the important stuff.

    When are taxi drivers going to get their remuneration increase?

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  22. swan (659 comments) says:

    “How are we supposed to take central bank independence seriously when Don Brash used to be the governor here…”

    http://www.rbnz.govt.nz/statistics/key_graphs/inflation/

    There you go Tom. – refer to figure 2.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  23. PaulL (5,872 comments) says:

    Don Brash was paid to meet an objective, and could be sacked if he didn’t. His political views were irrelevant in that context.

    Moving monetary policy to a committee, with that committee presumably taking things other than the objective into account (otherwise why put unions and manufacturers on there?), would logically mean the objective had been watered down.

    Of course parliament can change Reserve Bank independence. But they should do that by saying that they think it doesn’t work and they want to try something different. We could then all look to see whether it’s worked or not, and make our minds up who to vote for. Changing it by the back door whilst claiming to not be changing it…..well, that’s the kind of thing that newspapers and other commentators such as blogs should be pointing out.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  24. Simon Arnold (98 comments) says:

    The interesting point is the suggestion as to who gets their hands on the tillers: Unions and exporters.

    The former don’t object too much to a little bit of inflation since they tend to be able to recover it in wage negotiation, and the latter like the weaker currency.

    But higher inflation tends to erode incomes of those on fixed incomes and make life more difficult for importers.

    So in the short-run higher inflation is a fixed sum game, with winners and losers. Consequently it’s a one way bet to have it controlled by the winners.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  25. burt (7,793 comments) says:

    Tom Jackson

    Economic philosophies change every 30-40 years or so. We’re due.

    Sadly though the lovers of socialism have stood by their failed economic philosophies for way too long – hopefully you are right and the Labour party will work out that rampant social engineering via extending welfare for electoral popularity is the failure it has always been. It’s always popular giving away other peoples money though – so I guess we can’t expect self serving Labour folk to be honest and acknowledge their self serving ways are bad for NZ – all be it they are good for getting themselves elected.

    Vote: Thumb up 12 Thumb down 0 You need to be logged in to vote
  26. WineOh (541 comments) says:

    As if Mr Wheeler makes the sole decision by himself… without any influence or discussion with a large number of senior staff within the RBNZ and Treasury or complex forecasting and modelling tools.

    Yeah, a committee of external parties with vested interests in the outcomes will be of huge benefit.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  27. mikenmild (10,618 comments) says:

    But we already have a board that some would argue represents vested interests. That board gets to recommend the governor for appointment. The argument is really about how the government influences monetary policy, not whether is should do so at all.

    Vote: Thumb up 0 Thumb down 5 You need to be logged in to vote
  28. swan (659 comments) says:

    mikenmild,

    You are missing the point. The bank tries to meet its policy target. The value of a committee would be if a single governor was bad at hitting the target. There is no – “should we try to meet the target or should we think of the children”. Once you get into that area you are politicizing monetary policy. History has taught us that is not a good thing. Also a priori reasoning tells us that it is not very moral.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  29. mikenmild (10,618 comments) says:

    But monetary policy as we know it is the outcome of political processes. It’s not as though anyone has empirically proved that the institutional arrangements for carrying out that policy are the best that could ever be devised. Because there has been a bipartisan consensus on monetary policy for 25 years doesn’t mean monetary policy can never change. You might as well argue that because there has been a similar consensus about national superannuation that should never change either.

    Vote: Thumb up 0 Thumb down 4 You need to be logged in to vote
  30. swan (659 comments) says:

    mikenmild,

    It is actually pretty simple. As a nation we use New Zealand currency. We use it in our contracts, in our transactions, and as a store of wealth. When we enter into contracts, into debt, or save, we make desicions. We make these desicions on the basis of an understanding of the value of money and how it will change over time. Stability in the path of the value of the currency enables us to make informed desicions. Anything else simply adds uncertainty to our decisions. I am sure you could argue – well we could have a stable value path at say 10-12% inflation, but empirically it is a lot harder to target 10-12% (unstable) than it is to target 1-3%. And even if we could target 10-12%, if it was stable – prices and interest rates would adjust accordingly and we would end up where we started in real terms.

    The point is – monetary policy can deliver price stability (within reason). It cant deliver rainbows and lollipops.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  31. mikenmild (10,618 comments) says:

    I’m completely unqualified to express an opinion over the appropriateness of the current policy targets agreement. I only intended to argue that the independence of the Reserve Bank was a bit of political fiction. Any government can influence monetary policy by a number of methods; there is no sacrosanct arrangement.

    Vote: Thumb up 0 Thumb down 4 You need to be logged in to vote
  32. swan (659 comments) says:

    Independence is a political fiction in the sense that the government can always intervene, I agree. But that is just a tautology. What independence means in this context is that the government sets objective rules or guidelines and some “independent” group acts on the basis of said rules. Take for example the judicial system, the police, Transfund (now defunct), the RBNZ. “Independent” might not actually be a good word to use. What we are doing is “de-politicizing” individual desicions.

    So, what is the difference between a committee at the RBNZ, and this external board that Cunliffe is speaking of?

    The committee at the RBNZ is (if they are doing their job) trying to meet the target of keeping inflation to between 1% and 3%. Now, the point of this external board is not that unions or exporters have some special skills in being able to predict inflation over the medium term contingent on monetary policy settings. No, the point is, they have THEIR OWN OPINIONS about monetary policy itself! So in a way, Cunliffe may actually be right – these guys will be independent, VERY independent. But that is hardly desirable. It is the equivalent of telling high court judges – ignore statute and just do what ever you want – BASED ON YOUR OWN SELF INTEREST!

    So that is why this is a bad idea. Hope that is clear.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  33. mikenmild (10,618 comments) says:

    But the target is not enshrined in statute; it is more subtle than that. Your analogy with high court judges is not very helpful – the high court not only interprets but also makes law through its judgements. Personally, if a government wants to alter the settings of monetary policy I would prefer it to be done through changes to the policy targets agreement. Maybe Cunliffe is talking about a change that will give the appearance of more active policy without actually changing much at all.

    Vote: Thumb up 0 Thumb down 5 You need to be logged in to vote
  34. swan (659 comments) says:

    mikenmild,

    No analogy is perfect. I think you are smart enough to get the point. Sure change the policy targets agreement, but then we are back to talking about the content of what the PTA should cover – a topic you profess to be unqualified to speak on.

    “Maybe Cunliffe is talking about a change that will give the appearance of more active policy without actually changing much at all.” No. That is not a reasonable interpretation of what he has said (unless you think he is a bullshitter).

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  35. mikenmild (10,618 comments) says:

    That’s exactly what I think he is doing – telling people what he thinks they want to hear without much worrying about what might actually change.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  36. swan (659 comments) says:

    I hope you are right :)

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  37. srylands (386 comments) says:

    “That’s exactly what I think he is doing – telling people what he thinks they want to hear without much worrying about what might actually change.”

    yay – just what we need in a leader.

    Vote: Thumb up 3 Thumb down 1 You need to be logged in to vote
  38. mikenmild (10,618 comments) says:

    It’s a typical role for the leader of an opposition party: see all the things John Key was against before he came into government and decided to keep them.

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote
  39. srylands (386 comments) says:

    ““That’s exactly what I think he is doing – telling people what he thinks they want to hear without much worrying about what might actually change.”

    So what substantively different outcome does he want to see from the “committee” model that employs external experts (sic)? It can’t be better performance against the policy targets because that looks good. What else can it be other than monetary policy that is NOT directed at price stability – and hence a policy that gives us price instability and higher average inflation?

    Seriously, what other outcome can you see? Becasue it is that OUTCOME that scares me. If you could convince me that a “committee” with unions, monkeys, gnomes, or whoever would acheive better a better OUTCOME – i.e “inflaion tracking more closely to the policy targets” – well I would be all for the change. But I do not believe that is the plan.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  40. seanmaitland (455 comments) says:

    Tom Jackson, why is it that you dribble empty rhetoric all over threads like a rabid monkey, and as soon as people post valid links that blow your arguments away you suddenly disappear?

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  41. mikenmild (10,618 comments) says:

    srylands
    I don’t know what outcome he seeks; all we have to go on is what he said and that may be very different to what he does if he gets to lead a government.

    Vote: Thumb up 0 Thumb down 4 You need to be logged in to vote
  42. srylands (386 comments) says:

    “I don’t know what outcome he seeks; all we have to go on is what he said and that may be very different to what he does if he gets to lead a government.”

    Oh. It would be helpful if we had journalists who asked “What outcomes are you seeking?”

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  43. Johnboy (14,911 comments) says:

    It’s time Cunliffe and Norman stuffed all these dirty dairying folks/saved the environment and brought back the sheep retention scheme! :)

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  44. Reid (15,917 comments) says:

    What annoys me is he knows precisely what he’s doing in doing what he’s doing. He knows precisely how critical it is to the markets to avoid political interference in technical questions, which the interest rate purely is. He knows it poisons the well. And he knows it’s not his well it’s our well. Sadly he also must know it’s a cross the Rubicon kind of thing or more precisely a Pandora’s box.

    This will be part of Wussell’s portfolio, I suspect. Wussell will set the intewest wates evewy quarter and we will wejoice under his astute management. Perhaps he’ll setup a website on the Silk Road known only to lefties and the interest rates will get set by the number of likes each proposed rate receives. I would if I were him, except only conservatives would know.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  45. mikemikemikemike (301 comments) says:

    Double speak? How about all this bullshit about free markets and let’s remove regulation. Then go all socialist and beg from the government when shot gets bad. Having the government involved in matters relating to interests rates is bad but spare me the hysterics please and please don’t behave like your Nats are squeaky clean.

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.