Rising prices raise the prospect of householders bringing Ardern down from the clouds of adoration

The Labour  government has  floated  skyward on  a  cloud of public  adoration  for  many months  now and,  given the  conviction of  those  who  believe Jacinda Ardern  can  do  no wrong,  may  do so   for  as  long again.

On  the other  hand, harsh  realities  may  be  hitting  home,  at least  in  some  households.

This  week  Statistics  NZ  reported consumer prices rose a massive 1.3% (quarter on quarter) in the June quarter.  This was stronger than the  expectation of a 0.9% lift (3.0% year on year).

Annual CPI inflation rose to 3.3%, breaking through the top of the Reserve  Banks target band, and a post-2008 high.

ANZ  Bank  economists  had  one  word  for that:  “Monstrous”. Continue reading “Rising prices raise the prospect of householders bringing Ardern down from the clouds of adoration”

Robertson relishes responding to patsy questions and enthusing about the economic outlook – but is he missing some grim realities?

Grant  Robertson,  perennially  exuberant  as  finance  minister  when  it  comes  to telling  the  country  how  well  the  government  is  handling  the  economy,  has  been in  top  form on  the  subject in  Parliament  in   recent  days.

Whether  the  same   buoyancy is  being  felt in  every  sector  of the  economy  could be  another  story.

But here’s  how  Robertson  was  responding  in  the  House  this  week.

On  Tuesday  he  was  saying the government’s efforts to secure  the  economic recovery have been reflected in the latest measure of the country’s economic health. Statistics New Zealand reported last week that GDP rose by 1.6% for the March 2021 quarter, exceeding the expectations of even the most optimistic commentators.

“New Zealanders confidence in the recovery saw a boost in retail spending, particularly on big ticket household items, hospitality, and holiday accommodation. Importantly, activity in the construction sector returned to near record levels, while business investment in plant and machinery jumped by over 15 percent. The higher COVID-19 alert levels during the quarter only had a limited impact on the economy thanks to the quick response which provided cash flow and confidence. Quarterly activity in March has now exceeded the December 2019 quarter pre-pandemic level.

“Nevertheless, the data does show the volatility that NZ has to deal with during the pandemic. This 1.6% increase followed a 1% decline in the December quarter and a record 14.1% increase in the September quarter”. Continue reading “Robertson relishes responding to patsy questions and enthusing about the economic outlook – but is he missing some grim realities?”

The Aussies are aiming for economic growth but the Ardern Govt (clucking about wellbeing) seems to prefer Zombification

Is the  reality  of the  Ardern  government’s  policies   beginning  to  hit  home?  A slow, tentative  return  to  what might be regarded  as pre-Covid   normality  is  coming  into  sharper   focus as  government  fumbling, particularly  over the Covid  vaccination rollout, stirs  anger in  communities.

Just  as  Finance  Minister Grant  Robertson  extols the performance  of  the  economy  under his  stewardship, Kiwis are waking up  to  how  much better Australians  are  doing. We  shrank by 1% in  the  last  quarter of 2020 while  Australia grew by 3%.

The  international tourism  industry,  which pre-Covid had become NZ’s top foreign exchange earner,  is  virtually dead, and the  absence  of  international students  is  dealing  a  body blow to educational  institutions, even  down  to  primary  schools.

Even  more  concerning are ominous signs that things may  get  worse. A  headline  this  week pointed  to  the fact  that exporters  can no longer make forward freight bookings between Australia and NZ as international shipping companies abandon the relatively remote and marginal trans-Tasman routes in favour of profitable routes between China, Europe and the United States. Continue reading “The Aussies are aiming for economic growth but the Ardern Govt (clucking about wellbeing) seems to prefer Zombification”

A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz

Finance  Minister  Grant  Robertson  won’t  want to do anything  to disturb  the  waves  of  euphoria  washing  over  New  Zealanders when  he  presents  the  budget  this  week.  The  country is  still basking    in  the  recognition accorded  the Prime  Minister  with  the  top spot in Fortune magazine’s list of the world’s greatest leaders.

The annual list, which was published on Friday,  praised Ardern’s leadership during the Covid-19 pandemic as well as her “world-leading climate and gender-equity policies”.

Fortune magazine has been ranking and publishing top 50 world leader lists since 2014. Although Ardern has featured on it in the past, this is the first time she has been ranked  number  one.

Even  one-time National   supporters  line  up  in  the  queue   of  Ardern  worshippers.

So  Robertson   will  strive to  avoid  any  discordant  notes in  the  budget.  Yet  the  fact  is  that  the  NZ  economy,  though  it   has  survived the  Covid   pandemic  with  a  surprising  degree  of  success,  is  facing  many  challenges,  some  of  them  with  very  sharp  edges, as  it  moves  into  the  next  cycle. Continue reading “A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz”

Aussie Budget is worth reading, if you want a steer to where Robertson will take us next week

New  Zealanders  who  want  a  preview   of  Finance  Minister  Grant   Robertson’s  budget  next week  need  only take a  quick  read   of the  latest  Australian   budget  presented  in Canberra  last  night.

The  Liberal-National  coalition  is  promising a  huge  spend-up,  with  the   Federal Treasurer, Josh  Frydenberg,  being immediately accused  of  delivering a  “Labor-lite” document.

As  in  NZ, Australia’s is a  deficit-laden budget as the leadership strives to sustain a recovery from a coronavirus-induced recession.

Setting  the scene, the Federal government  reminds  the voters: Continue reading “Aussie Budget is worth reading, if you want a steer to where Robertson will take us next week”

Well done, Minister – almost $1bn of spare Covid cash is found and Robertson lands a new job to keep an eye on his colleagues

Yes, Grant Robertson’s pre-Budget speech has now been posted on the Beehive website and we can officially confirm that not all funding allocated in the COVID Response and Recovery Fund has been spent. Our Finance Minister has almost $1 billion of unspent dosh to play with (and the Taxpayers Union is reminding him he is under not obligation to spend it).

He also confirmed he has a new job (but we imagine he won’t be relinquishing any of the others).  He will be leading the establishment of a team which will ride shotgun on the implementation of “critical” initiatives.

This means he will set up a new team to do the PM’s job of ensuring ministers actually do what she wants them do and what they are paid to do, in other words.

As part of the Budget preparation, Robertson told the Wellington Chamber of Commerce, he asked each Minister to look again at COVID spending for which they were responsible to see if it was  still needed or is still a priority, and whether underspends could be reprioritised.

And hey – this exercise has yielded around $926 million worth of savings. Continue reading “Well done, Minister – almost $1bn of spare Covid cash is found and Robertson lands a new job to keep an eye on his colleagues”

No need to worry; the consensus says inflation isn’t going to be a problem

Ever since the 2008 financial crisis, pessimists have been saying we are due a global inflation surge. So far they’ve been wrong. The world’s economies, particularly the rich ones, have sucked up fiscal and monetary stimulus and the biggest official concern has usually been that the inflation rate is too low.

But even a stopped clock eventually shows the right time.  Given Covid-induced monetary and fiscal overdrive, might the worriers finally be proved right?

Continue reading “No need to worry; the consensus says inflation isn’t going to be a problem”

Financial Times chips in with some advice to our Finance Minister on the folly of adding housing to central bank’s deliberations

A Financial Times leader delivers advice that Finance Minister Grant Robertson should (but probably won’t) consider.

Essentially, the advice is to resist the temptation to  involve the central bank in the challenge of slowing the rise in house prices.

Changing regulation and reforming planning law is a smarter way to go.

The FT observes that – to many – it may seem obvious that the central bank quantitative easing programmes launched after the 2008 financial crisis have led to inflation, as money printing inevitably does.

But the inflation has shown up in booming stock markets, high prices for art and collectibles, and surging cryptocurrencies.  Rather than higher consumer prices, cheap money has led to asset price inflation.

In this reading, the FT says, central banks should reconsider their stimulus policies because they are only delaying and deepening the eventual bust.

Furthermore, according to the critics, stimulus is increasing wealth inequality and worsening housing crises.  Higher asset prices increase the net worth (as measured by market prices) of those who already have substantial wealth while leaving the position of those without assets unchanged.

Similarly, it pushes home ownership further out of the reach of those lacking in savings or inheritances — inflation that shows up in assets but not wages is particularly bad news for affordability.

The FT explains that this is why New Zealand’s government has instructed our  central bank to consider the effect of its policies on the housing market.

The centre-left administration of Jacinda Ardern has said that while the Reserve Bank will remain independent, it will have to take into account the government’s objective of “sustainable house prices”, which includes taming investor demand, when making policy decisions.

It is true that a fall in interest rates will increase asset prices, all other things being equal. Lowering the cost of borrowing should make it more attractive to buy long term assets, such as housing, that bring benefits that can last for decades.

Indeed, encouraging investment spending is part of a central bank’s motivation for cutting rates.

But to refer to a change in the price of assets relative to everything else as inflation — which means a change in the value of money — is a misnomer. A change in a particular set of prices is not the same as a change in all prices: houses have become relatively more expensive to all other goods and services in the economy, not just the Kiwi dollar.

Engineering deflation in consumer prices to address the particular, idiosyncratic, problems of the housing market would be a serious mistake. Using tighter monetary policy to reduce the price of real estate would also have the effect of reducing workers’ wages — a central bank-induced recession would ultimately do little for affordability.

Interest rates cannot be used to solve every problem and central banks have struggled enough to try to hit their existing inflation targets.

As the institution responsible for financial stability in New Zealand, the Reserve Bank should consider whether it has all the necessary “macroprudential” tools to address concerns about the housing market.

In November it already announced tighter restrictions on high loan-to-value mortgages. Requiring would-be homeowners to have bigger deposits will do little to address concerns about affordability, however.

Central banks, however, make a convenient scapegoat for politicians who are unwilling to take on the vested interests that can create an artificial scarcity of housing even in a land-rich country such as New Zealand.

Changing regulation and reforming planning law is a more sensible way to address the deficiencies of the housing market than running a monetary policy that would not be justified by the inflation and unemployment data.

In short, to solve New Zealand’s housing problems, “Ardern’s administration will need to look much closer to home”.

Robertson – of course – seems unlikely to be greatly bothered by the Financial Times, having  disregarded the advice of the governor of the Reserve Bank on this matter.

RNZ reported him as saying the government needs to use all the economic tools available to try to control escalating house prices.

Robertson is defending his decision to change the Reserve Bank’s remit to include house prices in its monetary policy considerations.

That is despite the bank’s governor, Adrian Orr, warning him last year that that was not a good idea.

Robertson said the government is not saying the Reserve Bank should be responsible for house prices – but the government needs to pull every lever within its power to tackle the housing issue.

The government was not suggesting the house-price crisis was entirely the responsibility of the Reserve Bank, Robertson said.

“What we are saying is that all parts of the apparatus need to be working towards these goals.”

Robertson said the government has been considering a wide range of options on both the supply and demand side of the housing market.

The Great Reset: Deputy PM pulls the plug on Magic Talk audience after reacting (badly) to questions about a conspiracy

None of our readers should be surprised to hear of a politician ducking questions.  But Deputy PM Grant Robertson’s handling of questions about “The Great Reset” and what he did subsequently bear closer examination.

The questions posed by host Peter Williams appeared designed to give Magic Talk Mornings listeners a better understanding of this Great Reset caper and whether New Zealand would be involved.

But Roberson dismissed the phrase as a conspiracy theory and – we are told – will no longer appear on the show.

As far as Point of Order can ascertain The Great Reset is an initiative of the World Economic Forum which has triggered conspiracy theories among reactionaries who fear it is part of a vile Marxist plot to over-tax them or otherwise do them a serious economic mischief.

But there are umpteen conspiracy theories around all sorts of things, including Covid-19 and the vaccines to deal with it.  Will Robertson no long be talking about them, either?

The WEF says on its website:

There is an urgent need for global stakeholders to cooperate in simultaneously managing the direct consequences of the COVID-19 crisis. To improve the state of the world, the World Economic Forum is starting The Great Reset initiative. Continue reading “The Great Reset: Deputy PM pulls the plug on Magic Talk audience after reacting (badly) to questions about a conspiracy”

Dairy prices and Fonterra’s re-establishment as a global  leader should be celebrated far beyond the cowsheds

The New Zealand economy, although battered  by the  Covid-19 pandemic, has  moved   into 2021  in  better  shape  than  anyone  might have predicted  just six months ago.

To  a degree  this has been due  to  the  continuing vibrant performance  in the export  sector  particularly  by the  primary industries. This  week  there  was a  fresh surge  of  confidence   within that sector  because of the signal from the big dairy co-op, Fonterra, in lifting its  milk payout  forecast.

Fonterra  now expects to pay farmers between $6.90-$7.50kg/MS. That is up 20c a kg from its previous forecast range of $6.70 -$7.30.

Analysts  had  seen this  coming  and  as  Point  of Order  has contended  in recent  posts  it is the  message the  rural regions  needed as  they made  plans for  the  coming year. Continue reading “Dairy prices and Fonterra’s re-establishment as a global  leader should be celebrated far beyond the cowsheds”