Inflation remains low

July 19th, 2016 at 7:00 am by David Farrar

Stuff reports:

Borrowers appear set to see even lower interest rates in the wake of lower than expected inflation.

On Monday Statistics New Zealand revealed that the consumer price index (CPI) rose by a less than expected 0.4 per cent in the year to June 30.

With the Reserve Bank forecasting that inflation would be 0.6 per cent, economists now see the central bank as odds-on to cut the official cash rate to 2 per cent on August 11, a new all time low.

Westpac, which was already forecasting an August cut, said market pricing of financial products suggested there was now an 80 per cent chance that the Reserve Bank would cut the OCR on August 11, up from 70 per cent before the figures were released.

So long as one doesn’t have deflation, I think low inflation is great.

In the last three years prices overall have risen just 2.5% over three years. While from 2005 to 2008 prices went up 9.5%.

Brash on inflation targeting

May 24th, 2016 at 2:00 pm by David Farrar

The SMH reports:

The first central banker to introduce inflation targeting to the world, the Reserve Bank of New Zealand’s Don Brash, says it is still relevant and today’s low inflation problem is probably something that will fade away.

“If you say ‘we don’t like inflation targeting’ what do you propose instead? It’s not at all clear what the alternative is,” the former governor told Fairfax Media.

“You’ve only got one instrument you can only really hit one target effectively. What target is it? Logically it should be some rate of inflation, I would have thought. Is inflation targeting desirable? Absolutely in my view. Is it sufficient? Probably not.” 

Dr Brash saw parallels with the Gulf War when oil caused a period of high measured inflation and “most central banks said you’ve got to ignore that”.

“We know that monetary policy has only a short-term effect on employment and on real growth.” 

Some used to argue that low inflation caused high unemployment but there has been a huge amount of empirical evidence to show this is not the case.

New Zealand targets annual inflation of between 1 and 3 per cent over the medium term, guided by a future midpoint of 2 per cent, versus the preference for 2 to 3 per cent price growth in Australia.

Wellington has shown a willingness to review its inflation target since its seeding in 1988. The concept was originally embraced as a way to protect the integrity of monetary policy setting from political meddling around election cycles.

Former prime minister Sir Rob Muldoon “used monetary policy in a very, very cynical political fashion”, Dr Brash recalls. The RBNZ was asked to find a way of “Muldoon proofing monetary policy” and that evolved into New Zealand’s policy targets agreement. It aimed for zero to 2 per cent growth, which is the same thing as price stability plus or minus 1 per cent.

I think we should still have this as the target range. I prefer 1% inflation to 2% inflation.


Inflation now at 0.4%

April 18th, 2016 at 2:00 pm by David Farrar

Stats NZ reports:

The consumers price index (CPI) rose 0.2 percent in the March 2016 quarter, Statistics New Zealand said today. This follows a fall of 0.5 percent in the December 2015 quarter.

“Higher prices for cigarettes, food, and housing-related costs were countered by lower prices for petrol and air fares,” consumer prices manager Matt Haigh said.

Cigarette and tobacco prices showed the highest upward contribution, up 9.4 percent in the March 2016 quarter following a rise in excise duty in January.

“The average price of a pack of 25 cigarettes was $28.79 in the March 2016 quarter, more than double the price from six years ago when annual 10 percent excise tax increases were introduced,” Mr Haigh said.

Excluding cigarettes and tobacco, the CPI showed a fall of 0.1 percent in the March 2016 quarter.

So if you’re not a smoker, then on average prices have not increased this quarter. That’s great considering there has been steady increase in wages, benefit rates and the level of superannuation. You get increased spending power.

The CPI increased 0.4 percent in the year to the March 2016 quarter, up from a 0.1 percent increase for the year to the December 2015 quarter.  

Housing-related prices continue to be the main upward contributor, up 3.0 percent in the year. This rise was led by higher prices for rent (up 2.3 percent) and newly built houses excluding land (up 5.0 percent).

Transport prices made the largest downward contribution for the year, influenced by lower petrol prices (down 5.1 percent). Excluding petrol, the CPI showed a 0.7 percent increase in the year to the March 2016 quarter.

I think around 1% is a good place to be for inflation. High enough to avoid deflation but not so high as to chew up purchasing power.

And as always I check the prices of a couple of items that Labour declared were a crisis as they were increasing so much.

  • Electricity prices up 0.6% from a year ago
  • Milk prices down 8.9% from a year ago

OECD Misery Rates

March 15th, 2016 at 7:00 am by David Farrar

oecd misery

The misery rate or index is the combination of the unemployment rate and the inflation rate. A country that has high inflation and high unemployment is in misery, while low unemployment and low inflation is the aim.

So of the 33 countries, only 9 have a misery index below 6%. NZ is 7th best at 5.1%.

We are better than Australia, US, UK and Canada at 5.4%.

The OECD average is 7.5%, EU average 9.2% and Euro zone average 10.6%.

The worst off is Greece at 23.9%, Spain 20.2% and Turkey 20.0%.

France is also very badly off at 10.2%.

Robertson predicted unemployment would hit 7%

February 8th, 2016 at 3:00 pm by David Farrar

Just a few weeks ago Grant Robertson said:

With unemployment set to head towards 7% in the coming year, it is reckless that the government still has no plan to address this.

Oh dear.

Inflation has been outside the Reserve Bank target range for eight of the last sixteen quarters yet he is not planning to take any action. 

And here Grant is complaining that inflation is not high enough!

Inflation at 15 year low

January 21st, 2016 at 7:00 am by David Farrar

Stats NZ reports:

The consumers price index (CPI) increased 0.1 percent in the year to the December 2015 quarter, following a 0.4 percent increase in the year to the September 2015 quarter, Statistics New Zealand said today. The previous smallest annual movement was a 0.5 percent fall in the year to the September 1999 quarter. 

That’s great for families, especially those on fixed incomes.

Inflation in the last three years has totaled just 2.4% or 0.8% a year.

Inflation from 2005 to 2008 totaled 9.4% or 3.2% a year.

And if you recall Labour’s major policy at the last election was to destroy the generation market for NZ electricity because power prices were going up too much. Well electricity costs have increased just 0.4% in the last year.

Also Labour were campaigning recently on the price of milk. They seemed to think milk should cost less than coke, despite the fact one has to be farmed, milked and transported while the other is just a syrup you add to water.

Anyway what have milk prices done? Down 14.2% from a year ago! Labour really do pick them well. In fact milk is cheaper now than it was in 2008!

Inflation remains low

October 16th, 2015 at 12:00 pm by David Farrar

Stats NZ reports:

From the September 2014 quarter to the September 2015 quarter:

  • The CPI increased 0.4 percent (0.4 percent in the year to the June 2015 quarter).
  • Cigarettes and tobacco (up 13 percent), newly-built houses excluding land (up 5.5 percent), rentals for housing (up 2.3 percent), and local authority rates (up 5.9 percent) all increased.  
  • Lower petrol prices (down 6.8 percent) were the main downward contributor.
  • Prices for non-tradable goods and services increased 1.5 percent, which was the smallest annual increase since the December 2001 quarter. 
  • Prices of tradable goods and services decreased 1.2 percent.

This is good as it means families get to keep more of their income, rather than have it soaked up in higher costs.

In the last three years overall prices have gone up only 2.8%.

The tradable sector has actually had prices dropped 2.6% over the last three years while non-tradable has gone up 7.0%.

Labour often go on about power prices. Guess how much electricity has gone up in the last year? 0.07%. Another crisis solved!

Inflation at just 0.3%

July 17th, 2015 at 7:00 am by David Farrar

StatsNZ reports:

The CPI increased 0.3 percent in the year to the June 2015 quarter, following a 0.1 percent increase in the year to the March 2015 quarter.

The prices of tradable goods and services (which face foreign competition) decreased 2.0 percent in the year, with lower prices for petrol (down 7.4 percent) and for international airfares (down 6.3 percent).

Non-tradable goods and services increased 2.0 percent, the smallest annual increase since the December 2001 quarter. The main contributor was cigarettes and tobacco prices (up 14 percent), influenced by the increase in excise duty in January 2015 – excluding cigarettes and tobacco, the CPI fell 0.1 percent in the year to the June 2015 quarter.

So if you are not a smoker, we’ve had basically no inflation at all. It means every dollar of your pay increase you get to keep, rather than have it gobbled up by increasing prices.

Of note is that seasonally adjusted electricity prices have been constant for the last 12 months.

Here’s a comparison of average annual price increases in six and a half years of National, compared to the last six and a half of Labour.

  • Electricity 3.8% vs 8.6%
  • Fruit & Vegetables 1.3% vs 4.6%
  • Food 1.7% vs 3.6%
  • Housing and Utilities 3.1% vs 6.1%
  • All Goods & Services 1.8% vs 2.9%


Inflation now 0.1%

April 20th, 2015 at 2:00 pm by David Farrar

With two quarterly falls in prices, annual inflation is now just 0.1%. That’s great for families and consumers.

But we need to look at the difference between the various components. There are some areas with pressure on prices, and others where there is not.

  • Prices in the tradables sector have fallen 2.8% while non-tradables are up 2.3%. So we still have inflation in the areas where there is no foreign competition.

The main components have different levels of annual price increases. In order they are:

  1. Alcohol/Tobacco 4.2%
  2. Education 4.0%
  3. Housing 3.0%
  4. Health 1.8%
  5. Food 1.2%
  6. Misc 0.8%
  7. Household contents -0.9%
  8. Clothing -1.1%
  9. Recreation/Culture -1.2%
  10. Communications -4.5%
  11. Transport -6.4%

Of interest, if the tax had not gone up on tobacco, we would have had deflation of 0.2% over the year.

Should we change inflation target back to 0 to 2%?

April 3rd, 2015 at 12:00 pm by David Farrar

Brian Fallow writes:

Should the Reserve Bank’s inflation target be lowered, ask the Bank of New Zealand’s economists.

The target band of 1 to 3 per cent, “with a focus on keeping future average inflation near the 2 per cent target midpoint”, is not, after all, Holy Writ. It was not chiselled into the back of the tablets Moses brought down from Mt Sinai.

The target band has been changed twice already, from its initial 0-2 per cent when Don Brash had the task of dealing to rampant inflation and high inflation expectations, to 0-3 per cent in 1996 and then to 1-3 per cent in 2002, with the explicit focus on the mid-point added when Graeme Wheeler took office in 2012.

I much prefer 0 to 2% than 1% to 3%. It says don’t end up with deflation but have inflation on average at just 1%, which is the best way to protect people on low and fixed incomes.

Will NZ have deflation?

January 10th, 2015 at 10:00 am by David Farrar

The Herald reports:

The New Zealand economy may be in its first six-month period of deflation in more than a decade, in the face of weak crude oil prices and global over-capacity, pushing the prospects of interest rate hikes out into 2016, according to Bank of New Zealand. …

BNZ head of research Stephen Toplis says for New Zealand, deflation during the current cycle isn’t the ugly phenomena being grappled with in, say, the euro-zone, where consumer prices fell 0.2 per cent in 2014 and where demand has been dwindling.

By contrast, New Zealand’s economy is operating at or above capacity, the housing market is still steaming, and kiwis are showing no inclination to rein in their spending.

“Normally when you talk about deflation you are petrified,” Toplis said. “The wheels are falling off, there’s a downward price spiral. But there’s zero evidence of that in New Zealand at the moment. The single biggest thing is our ability to freely access world goods at low prices. For New Zealanders that’s a good thing unless you’re a local retailer.”

“There is absolutely no evidence whatsoever of retrenchment in activity due to the pressure on the general consumer price level,” he said.

I don’t think it would be a bad thing to have a growing economy, growing wages and falling prices.

NZ inflation targeting led the world 25 years ago

December 23rd, 2014 at 6:39 am by David Farrar

Neil Irwin in the NY Times writes:

Sometimes, decisions that shape the world’s economic future are made with great pomp and gain widespread attention. Other times, they are made through a quick, unanimous vote by members of the New Zealand Parliament who were eager to get home for Christmas.

That is what happened 25 years ago this Sunday, when New Zealand became the first country to set a formal target for how much prices should rise each year — zero to 2 percent in its initial action. The practice was so successful in making the high inflation of the 1970s and ’80s a thing of the past that all of the world’s most advanced nations have emulated it in one form or another. A 2 percent inflation target is now the norm across much of the world, having become virtually an economic religion.

The article has some interesting history on how we made that decision to have the Reserve Bank focus on inflation only. It is a policy that is now followed by pretty much every sane country.

Sadly in NZ the Greens and NZ First rail against it (Greens wanted to print money just a year ago) and Labour has signed up for watering it down. Low inflation doesn’t happen by chance. Who wants to go back to the bad old days of high inflation?

A $100 basket of goods in 2008 only costs $112 today – six years later. But if you looks at the period 1978 to 1984, a $100 basket of goods would have gone up 105% to $205 in just six years.

One of the best way to help low income families is to keep inflation down.

Hat Tip: Eric Crampton

High inflation does not lead to high growth

December 2nd, 2014 at 10:00 am by David Farrar

The Herald reports:

Inflation is the right target for monetary policy, says Reserve Bank governor Graeme Wheeler, and has served the country well over the past 25 years.

But there were a lot of things monetary policy couldn’t do, he said in a speech yesterday. They included improving the economy’s long-term growth rate, alleviating an overvalued exchange rate, lowering long-term interest rates and doing much more than buy time when the housing market gets out of balance.

Inflation was a hidden tax, he said, affecting most severely those with fixed incomes and holders of cash rather than inflation-protected assets.

Which makes the left’s desire to have more inflation, so weird. It harms those on lowest incomes the most.

In the 20 years before the Reserve Bank Act gave the bank its price stability mandate, annual economic growth averaged 2.2 per cent and inflation swung wildly around an average of 11.4 per cent. Since 1990 growth averaged 2.3 per cent and inflation 2.6 per cent.

What some call the good old days.

Issues that matter – the Economy

September 9th, 2014 at 4:00 pm by David Farrar

I think the economy matters and should be a much bigger issue in this election so I’ve put together almost a dozen graphs showing the difference between National and Labour’s record on 11 important economic indicators. These are issues that matter to families and businesses.



Food prices increased 18.6% in Labour’s last term. Food prices have increased only 1.3% in National’s last three years.



Labour left office with the current account deficit at 7.9% of GDP. It is now at 2.8%.



Power prices went up 22.9% in Labour’s last three years. The rate has halved to 12.1% in National’s last three years.



There was a net loss of 35,830 people to Australia in Labour’s last year of office. In the last 12 months only 7,150 net departures – and in recent months under 100 a month.



The overall cost of living increases or inflation totalled 9.5% in Labour’s last three years. A third of that now at 3.3% over the last three years of National.



Labour left office with an annual balance of trade deficit of $5.3 billion. In the last 12 months it has been a surplus of $1.3 billion



Remember Labour wanting to remove GST off fruit and vegetables. Under the last three years of Labour their prices went up 33.2%! Total increase in the last three years is a mere 1.4%.



The deficit in 2008/09 (on the fiscal settings left by Labour, and the impact of the GFC) was a massive $10.5 billion. Labour have opposed every piece of spending restraint since, but despite their opposition we are on track to a small $300 million surplus this year.



In June 2008 the median after tax income for a full time worker was $38,600 (in 2013 dollars). That has increased to $42,100 by June 2013, meaning the median FT worker has an extra $3,500 income to spend – and this during the worst recession the world has seen since the Great Depression.



Unemployment went up by 27,000 in Labour’s last year in office. It has declined by 17.000 in the last 12 months, and is projected to keep declining.

You are welcome to share any or all of these graphs. All data is directly from Stats NZ Infoshare except the income data where I have used the IRD website to calculate the tax impact and the Reserve Bank website to adjust them for inflation.

New Zealanders have a clear choice. Remaining on our present course which is surplus, falling unemployment, low prices, fewer Kiwis leaving, growing after tax incomes and affordable food – or a radical change of policy which would see many more taxes, less competition, a massively expanded state and an unstable alternate Government.

It is only through a healthy economy do we get to have the money to fund our health and education systems. And that brings me to my final graph.


That is economic growth for Labour’s last year in office, and National’s last 12 months.

Government do not directly control many of these economic measures. But they can and do impact them with their economic policies. The difference between where we are today and where we were in the mid to late 2000s is stark.

Hickey on power prices and rates

August 17th, 2014 at 1:00 pm by David Farrar

Bernard Hickey writes:

Local governments and electricity companies are to blame for New Zealand’s inflation rate being much higher than it should have been for the past 10 years.

They have raised their prices between 5 and 8 per cent each year for the past decade, despite being semi-regulated and mostly publicly owned.

Let’s have a look at annual electricity inflation in the CPI:

  • 2004: 8.8%
  • 2005: 4.1%
  • 2006: 7.1%
  • 2007: 6.5%
  • 2008: 7.7%
  • 2009: 2.1%
  • 2010: 5.8% (2.2% is a GST increase compensated by tax cuts)
  • 2011: 2.4%
  • 2012: 5.2%
  • 2013: 3.0%

Now let us look at rates.

  • 2004: 3.9%
  • 2005: 7.5%
  • 2006: 7.4%
  • 2007: 6.7%
  • 2008: 5.7%
  • 2009: 5.9%
  • 2010: 6.9% (2.2% is a GST increase compensated by tax cuts)
  • 2011: 4.6%
  • 2012: 4.3%
  • 2013: 4.1%

So I agree with Bernard both have been big contributors to inflation, and both are too high. I would note that they both seem lower in the last five years than the previous five years.

Electricity inflation averaged 5.4% from 2004 to 2008 and 3.3% (excludes GST change) from 2009 to 2013. Rates inflation averaged 6.2% from 2004 to 2008 and 4.7% (excludes GST change) from 2009 to 2013. 

Although the rates have trended down since 2004, they are still much higher than the Reserve Bank’s 1 to 3 per cent inflation target. And that persistent inflation has acted like a type of plaque in the arteries of the economy, putting up its blood pressure of inflation, interest rates and the exchange rate.

Without that persistent inflation at two and three times the rate in the rest of the economy, New Zealand’s interest rates and currency would have been significantly lower.

I’ve always wondered why Reserve Bank Governors Graeme Wheeler and Alan Bollard haven’t convened a conference of mayors and CEOs of councils, electricity generator-retailers and lines companies to read them the riot act.

Not a bad idea. But how much do they contribute?

Electricity is 3.9% of the CPI and rates 2.7% so they make up 7.6% of total costs.  On average they have been responsible for the inflation rate being 0.3% higher per year than it would have been if there were no price increases. A better comparison might be the impact if they had been at the target 2%. Their contribution then is an extra 0.2% a year – which is not insignificant in a tight range the Governor must target.

Inflation less than expected

July 17th, 2014 at 10:00 am by David Farrar


Inflation was 1.6% in the last year, which is less than expected. The lower inflation is, the more spending power households and businesses have.

This should mean that interest rates do not rise as much as projected, even though I still expect one more 25 basis points increase later this month.

Prices stable

April 19th, 2014 at 4:00 pm by David Farrar

Stats NZ reports:

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays.

Cigarette and tobacco prices rose 10.2 percent, following an 11.3 percent rise in excise duty in January. “The CPI without cigarettes and tobacco showed no change in the March quarter,” prices manager Chris Pike said.

That means no cost of living increase, if you are not a smoker.

Also of interest is that despite the scare stories about power price increases of 24%, the quarterly increase in the cost of electricity for households is only 0.07%. Remember that figure.

Also food prices are down 0.3% in March, and are only 1.2% higher than a year ago.


Milk cheaper, beer price soars

February 18th, 2014 at 3:00 pm by David Farrar

Stats NZ reports:

The milk’s a touch cheaper, but the beer’s more expensive than it used to be, according to Statistics New Zealand’s annual snapshot of our country.

New Zealand in Profile 2014, released today, shows the average price of two litres of milk fell from $3.23 in 2008 to $3.19 last year, while an average 400ml glass of beer went up from $4.47 to $5.78 in the same five years.

So since 2008 the price of milk has dropped 1.2% and the price of beer has gone up 29.3%. That’s sad!

Fallow on inflation

February 3rd, 2014 at 3:00 pm by David Farrar

Brian Fallow, NZ Herald Economics Editor, writes:

So we have David Cunliffe in his state of the nation speech on Monday deploring that people are struggling with a rising cost of living while their wages stay still and then talking about “reforming” the Reserve Bank Act to assist exporters.

By reform, they mean to have more inflation – which of course makes the cost of living increase!

It is one of the ironies of our political discourse that the parties of the left are the most casual about inflation when it is the poor and economically powerless who suffer most when inflation gets out of hand and as it is brought under control again. Perhaps they are too young to remember. 

If more inflation is the answer, the question is wrong.

CPI 0.1% for quarter

January 21st, 2014 at 2:00 pm by David Farrar

Stats NZ reports:

The consumers price index (CPI) rose 0.1 percent in the December 2013 quarter, Statistics New Zealand said today. Higher international air fares and rising housing and dairy prices were partly countered by lower vegetable prices and cheaper petrol.

International air fares rose 12 percent in the December 2013 quarter – the highest quarterly rise since the December 2009 quarter. “International air fares usually rise in December quarters. This quarter’s rise reflects seasonally higher air fares to Asia and Europe,” prices manager Chris Pike said. Package holiday prices (up 7.3 percent) also showed a seasonal rise.

Prices for housing and household utilities (up 0.5 percent) also rose, reflecting higher prices for property maintenance, purchase of newly built houses, and rentals for housing.

Annual inflation is 1.6%which is higher than I like it (I believe in aiming for 1%) but under the midpoint of the 1% to 3% range.

I prefer to look at the long-term series. Here are some comparisons of average annual price increases over the last five years (Dec 08 to Dec 13) compared to the previous five years (Dec 03 to Dec 08).

  • Electricity 3.9% compared to 7.8%
  • Household Energy 3.6% compared to 10.0%
  • Food 1.7% compared to 3.4%
  • Fruit & Vegetables 0.6% compared to 6.4%
  • Rental Housing 1.9% compared to 3.6%
  • Home Ownership 2.9% compared to 8.0%

Labour are very good at claiming they will lower food prices, electricity prices and housing costs – but their track record speaks for itself. Last election they campaigned to remove GST on fruit and vegetables. Well under the last five years of Labour they increased by 32%, and under five years of National just 3%.

Inflation at 14 year low.

July 16th, 2013 at 2:02 pm by David Farrar

Stuff reports:

There is little in today’s inflation numbers to suggest the Reserve Bank will be forced to change the official cash rate (OCR) earlier than forecast.

Annual inflation has dropped to just 0.7 per cent, the lowest level since 1999, with higher power and housing costs offset by lower petrol and car prices in the June quarter.

The OCR is at 2.5 per cent, a historic low and economists are not expecting to see any rise until early to mid 2014. The central bank releases its next interest rate review on Thursday next week.

Consumer price inflation has been one per cent or below for a year now, and low inflation has allowed the OCR to remain at 2.5 per cent for some time, TD Securities head of Asia Pacific research Annette Beacher said.

Inflation low, interest rates low, economy growing and jobs being created. Not too bad.

The average inflation rate since December 2008 has been 2.2%.  If you exclude the GST increase which had compensating tax cuts then it would be 1.7%.

In the previous 18 quarters, it was 3.3%. That means prices increased around 10% every three years.

Labour on costs

July 13th, 2013 at 9:00 am by David Farrar

David Shearer has said:

“Kiwi families have been hit with a triple dose of bad news in the last 24 hours, with petrol prices, power prices and food prices all jumping sharply,” says Labour Leader, David Shearer.

“Just in time for the school holidays, petrol prices went up four cents a litre to $2.26.9 for 91-octane.  That’s on top of the July 1 three cent increase courtesy of the Government hiking up petrol tax

Yes petrol prices have gone up – because the dollar has dropped 10% in the last couple of months. Now which party has been saying that the dollar is still far too high and the Govt should intervene to bring it even lower (and hence make petrol more expensive)? You’ve got it – Labour (and Greens and NZ First).

“The latest power price data shows domestic power prices rose by 2.2% in the last three months, which means the average household will pay an extra $50 a year. 

No it doesn’t. The electricity CPI was 1366 in Dec 2012 and 1368 in March 2013. That’s an increase of 0.1%, not 2.2%.

“And the cost of food rose by 2.1 per cent in June – 50 per cent faster than in June 2012 and June 2011.  In fact, it was the biggest single monthly food price increase since National pushed up GST in October 2010. 

Food prices vary greatly month to month. The sound comparison is food prices compared to a year ago as that takes account of seasonal variations. And food prices up just 0.6% higher than a year ago, which is historically a very small increase.

Greens dump printing money plan – for now!

June 19th, 2013 at 11:10 am by David Farrar

Vernon Small reports:

The Greens have dumped their call for quantitative easing – or printing money – after it became an electoral liability for the party and a future Labour-led government.

Green co-leader Russel Norman yesterday confirmed the u-turn after Monday’s release of the joint Labour-Green-NZ First-Mana report into manufacturing left the policy out of the mix.

Prime Minister John Key and other Government ministers have latched on to the plan to ‘‘print money’’ to paint the Opposition as economically radical.

Norman said it was never Green policy but was included in a discussion paper, issued last October.

This suggests they were not advocating it. This is far from the reality. Russel Norman was constantly tweeting that we should be printing money, and providing examples of other countries that were doing so. There is no doubt that the Green’s proposed Finance Minister thinks we should be printing money. The only thing that has changed is they have agreed to stop talking about it in public.

But if a Labour/Green Government got into office, and couldn’t get the books to balance, what do you think is more likely – that they’ll cut spending or print money?

And enjoy Clark and Dawe as they explain what the Greens mean by quantitative easing!

Print baby print

May 25th, 2013 at 6:25 am by David Farrar

Stuff reports:

Economist Ganesh Nana wants the Reserve Bank to intervene in foreign exchange markets for as long as it takes to bring the kiwi dollar down.

The Berl economist told deer farmers in Wellington the bank should become a daily trader till the exchange rate fell to “something sensible for our export sector”.

The dollar has traded close to US86c recently, falling to almost US80c this week, before rebounding to about US80.9c yesterday.

“Sooner or later the speculators – Japanese housewives and Belgian dentists – will find somewhere else to play.”

That may be one of the most risky and/or stupid strategies I have ever seen. In fact the more a Government intervenes in a currency, the greater the profits are for those speculating against it.

I can think of several countries that have tried that strategy – and all have lost.

The reason why they played in New Zealand was because they knew it was an easy win.

Asked if New Zealand had the resources to do this, Nana replied, “It’s called a printing press. I’m not kidding,” he said to laughter.

“You can afford it. The Government has the legal right to print as much dollars as it likes.”

The Green Party policy. Just print as much money as possible.

It certainly would lower the dollar.

It will also increase prices and bring  back rampant inflation.

How they plan to pay for their promises

March 14th, 2013 at 4:00 pm by David Farrar



This is the alternative. They honestly seem to believe that you can enrich a country by just printing more money. I thought this lunacy died out with Social Credit.

The only Western countries doing QE are those which have the official cash rate near zero and have run out of other options. No sensible country is advocating printing money in the circumstances NZ is in.

There is a difference between a last resort and a preferred option. As an analogy if someone is dying from blood loss through a severed limb then a tourniquet is your last resort to stop them dying. But if they have just cut their leg open a bit, you don’t apply a tourniquet as your first response because the impact of doing so is very nasty.

In monetary terms, the nasty impact is prices go up and up.

You can see the Twitter debate here.

Be scared, be very scared. Most Green policies will just be inefficient and waste money but not necessarily be hugely harmful. This one is different.