Grimes’ grouches with the effects of govt policies on Kiwis’ wellbeing may sting more than the Groundswell protest

The  Ardern  government may  have been  stirred,  but  it  wasn’t  shaken,    by  the  nationwide protest  by  farmers  last  Friday.  And no matter how  far  the protest may have  turned   heads   in  the  rest  of  the  population,   it  leaves  farmers  no  further   advanced  in  persuading  ministers  to  modify  or  revise  the  policies  which  their  action targeted.

So  if  ministers  won’t  back  down  on their  environmental reforms or their climate change  policies,  where   can  the  farmers  go?  Parade  through  Wellington  to  Parliament?   Mount a 24-hour  vigil  in  Parliament  Grounds?

So  far  there has  been   silence  from the  originators   of  the   Groundswell  and if  there  is  a  new  sense of  unity  in  the  rural regions,   it   has yet  to  be  channelled into the  kind  of  pressure that   automatically  achieves  change.

Farmers may be disenchanted with being  told  how to farm, but the  evidence of climate  change  has  been  rammed   home in  the  provinces  in  recent  days hard  enough  to  convince  churlish  sceptics  of  the  need  for urgent  climate  action.

As  Point  of  Order  sees  it, this  is  the  chance for  Ardern   and  her  team   to  find  the  compromises  which    will   demonstrate  to  the  world  that  NZ  is  once  more  at  the  front  of  the  curve   in farming practices.

In  any  case,  the  Ardern   government  looks   as  if  it  has  stumbled   into an even deeper pit  closer    to  its  own  doorstep.

The  charge   is  that  it  has  created  a  “wellbeing”   disaster.  “Wellbeing”  is  one of  its  pre-eminent  goals.

Finance Minister  Grant  Robertson  even   designs    his  budgets  to  achieve  “wellbeing”   as  he  pours  billions   into measures  to  raise  living  standards.

But  Arthur  Grimes, a  former chairman  of the  Reserve Bank  and a former Chief  Economist at both the Reserve Bank and the National Bank of New Zealand, says the government  and Reserve  Bank have  engineered   a “wellbeing  disaster”, using the inflation targeting approach towards monetary policy he designed in the late-1980s.

Grimes, who now heads up Wellbeing and Public Policy at Victoria University and is a Senior Fellow at Motu Economic and Public Policy Research, laments the explosion in house prices that has accompanied the RBNZ’s slashing of interest rates.

“This is the worst wellbeing disaster we’ve probably had in the last two decades,” he told interest.co.nz.

“I can’t imagine a worse wellbeing outcome that’s been engineered than keeping young people and poorer people out of the housing market.”

He has believed for some time the RBNZ overcooked its response to COVID-19 by loosening monetary policy too much.

He partly attributes this to the RBNZ being required to target annual consumer inflation of between 1% and 3%.  Pre-1996, the target was between 0% and 2%.

“You basically have a central bank that’s actively been pushing up the cost of living. It just seems extraordinarily detrimental to wellbeing,” he said.

“If you have a wellbeing government, why would it be trying to push up the cost of living for people?…

“Prices are still going up when inflation is at 1%.”

The Consumer Price Index (CPI) hit a 10-year high of 3.3% in the year to June. Meanwhile, the median house price rose 28%, according to the Real Estate Institute of New Zealand.

Grimes believed the RBNZ could be made to target house price inflation in addition to consumer price inflation when setting monetary policy.

He commended the Government for recently requiring the RBNZ to “assess” the impact of its monetary policy on house prices, but maintained it could go further.

Grimes also reiterated his opposition to the Labour-led Government in 2018 requiring the RBNZ to target “maximum sustainable employment” as well as inflation.

He is adamant this requirement prompted the RBNZ to do more to lower interest rates than it should have.

Grimes said the Treasury was “utterly incompetent” when it advised the government on making the change.

“Now we’re seeing the result of that,” he said.

“It’s just terrible what’s been done to the generation that’s left school and getting into the workforce.”

  Point  of  Order   suspects  the   Grimes’  onslaught   may  be hitting  the  government where  it  hurts   far  harder  than  the  farmers’ howl  of  protest.