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”

The political payoff is plain but is it smart to borrow $219,512 per job (mostly temporary) to spruce up the Murihiku Marae?

The Point of Order Trough Monitor was triggered today by the announcement of a $9 million handout for Southlanders – sorry, some Southlanders.

The news came from the office of Grant Robertson who, as Minister of Finance, prefers to invest public money rather than give it away – especially when it is borrowed money which taxpayers eventually will be called on to repay.

Accordingly, wearing his “Infrastructure Minister” hat and in the company of Te Tai Tonga MP Rino Tirikatane, Robertson announced the Government is investing $9 million “to upgrade a significant community facility in Invercargill, creating economic stimulus and jobs”.

The only other news from the Beehive came from ACC Minister Carmel Sepuloni, who announced the appointments of three new members to join the Board of ACC on 1 February.

“All three bring diverse skills and experience to provide strong governance oversight to lead the direction of ACC” said Hon Carmel Sepuloni.

Of course they do. Continue reading “The political payoff is plain but is it smart to borrow $219,512 per job (mostly temporary) to spruce up the Murihiku Marae?”

What a good sport Robertson can be – if the demand for free handouts of money is too big, he will find some more

The ministerial slate has been cleared. There was nothing on The Beehive home page when we went looking for the latest news this morning.  

But the Point of Order Trough Monitor has been alerted by other sources of information to more bizarre examples of oinkers being fattened at the taxpayers’ expense.

The nature of the feeding frenzy has been recorded in a background document which itemises the final amounts awarded through the Community Resilience Fund – Phase Two (CRF 2).

The document was “proactively released” on Sport NZ’s website on October 14. 

This tells us it came into the ministerial domain not of Shane Jones (we wonder what he is up to today?) but of Sports and Recreation Minister Grant Robertson.

It further tells us Robertson was or is doling out around $15 million to more than 2,000 sporting organisations as part of phase 2 of the aforementioned fund. Continue reading “What a good sport Robertson can be – if the demand for free handouts of money is too big, he will find some more”

Ardern is skipper and Robertson is in charge of the engine room as the govt sets sail on a clear course with a new crew

PM  Jacinda  Ardern, conceding the next three years will be very challenging for NZ, has two overarching priorities  for  her  government: to drive the economic recovery from Covid-19, and to continue the health response to keep NZers safe from the virus.

In what will be a difficult environment it’s critical we have our most experienced ministers leading the ongoing Covid response to keep New Zealanders safe from the virus and to accelerate our plan for economic recovery.       

Sensibly, then,  she  has   recognised  the  skills  of   Grant Robertson  who  has  been  given   the  task  of  co-ordinating  the  drive to  regain  economic growth.  Besides  keeping the  Finance  portfolio    Robertson becomes  Minister  of  Infrastructure. And  his  seniority is  reinforced    with the  role, too, of  Deputy Prime Minister—a  role  which he had previously filled  in all but  name.

Labour’s recovery plan includes $42bn of infrastructure investment that will create jobs and ensure the economic recovery.   It    also  has  to   deliver much needed improvements to  roads and public transport, to schools, hospitals and housing, while also continuing to support the regions.

Ardern,  in  effect,  will be  the  captain  on   the  bridge  while  Robertson  is in  charge  of the  engine-room. Continue reading “Ardern is skipper and Robertson is in charge of the engine room as the govt sets sail on a clear course with a new crew”

$4bn hole in National’s fiscal programme raises questions about Treasury’s data-checking role and independent monitoring

Speaking as Labour’s Finance spokesperson, rather than Minister of Finance, Grant Robertson was quick to crow about the discovery of “a basic error” which left a $4 billion gap in National’s economic plan.

“If National can’t even do the basics required on their own policy costings, they cannot be trusted to run the country. Making mistakes like this have real world consequences that New Zealand does not need in this challenging time in our history.”

Robertson was harking back to an announcement a few days earlier, when (he gloated)

“ … National threw out a desperate economic policy that included $4.7 billion of tax cuts that would give Judith Collins $4,000 at a time when New Zealand needs to be investing in services like health and education for our future.” 

This is  a tad puzzling, prompting a question we sent to the people who despatched the press statement:  giving Judith Collins $4000 of what?  We await a response.  Continue reading “$4bn hole in National’s fiscal programme raises questions about Treasury’s data-checking role and independent monitoring”

ACT’s resource development plans would encourage mining – but not at the expense of the environment

Finance  Minister  Grant  Robertson  couldn’t  resist  playing  a  fresh  variation on his good   news signature tune   ahead   of   the predicted dismal  figures  on  April-June  GDP  figures  due  out this  week.

He   says economic activity across the Auckland region and the country bounced back to levels experienced under alert level 1 following Auckland’s move out of alert level 3.

He cites  analysis in the Treasury’s latest weekly economic update  which shows:

  • Auckland card spending under level 2.5 bounced back to levels similar to spending under alert level 1
  • Auckland heavy traffic volumes rebounded to be higher than the same time a year ago
  • Rest-of-NZ card spending recovered to levels seen during alert level 1
  • Rest-of-NZ heavy and light traffic volumes both rose above 2019 levels.

So   he believes   the  rest  of the country    should sing-along  because  the data shows the economic benefits of sticking to the government’s “clear elimination plan and investments in extra contact tracing and health resources. It follows from the strong bounce we saw after the initial moves after levels 4 and 3,”.

In essence  he is  saying  we  should shrug   off  the large drop in activity in the June quarter, due to the impact of level 4 to eliminate Covid-19.

“What our consistent health response means is we get a head-start on the economic recovery – economists are forecasting a record quarterly increase in GDP in the September quarter (reported in December) as the economy bounces back.The Treasury’s original estimate for June quarter GDP in Budget 2020 was for a 23.5% drop. Since then, economists have said NZ’s economy is stronger than expected in the near term as we opened up quicker than other countries.Continue reading “ACT’s resource development plans would encourage mining – but not at the expense of the environment”

Expats may find NZ is no longer the land of fair go but we do have a gung-ho Finance Minister

More  than 33,000  New  Zealanders  are  reported to have returned  home  since  the Covid-19 pandemic  began  earlier  this year.  Many of  these  expatriates may  have  lost their  overseas jobs ,  or  felt  it  would be  safer  back  in  a  country  that appeared  relatively unscathed  by the pandemic. Others  may have  found   they  did  not  qualify for health benefits  if they contracted  the virus.

For  many  it has been a  costly  process.

Academics   worry  there  won’t  be  jobs   for   them   in  the  months  ahead   because  of the  collapse    of   thousands  of  businesses   in the  tourist  and   hospitality  industries. Economic recovery,  they say, will  be slow  and  difficult.

Some returning  expatriates  – who could  have been out of  NZ  for  a  decade or  more  – may be  dismayed to  find New Zealand  is  no longer the land of the “fair go”  in which they were raised.  According  to Max Rashbrooke, the 2020 J D Stout Fellow at Victoria University of Wellington,  NZ  is  no longer a country where all have opportunities to get ahead.

Rashbrooke has  been  warning   readers  of  The  Guardian  newspaper  in    Britain  that  NZ  no longer  wears  an  egalitarian  image. Continue reading “Expats may find NZ is no longer the land of fair go but we do have a gung-ho Finance Minister”

Hurrah! We can all bounce back stronger together (and then we can think about paying back the borrowed billions)

Finance  Minister  Grant  Robertson   told  Parliament    this  week  “this   has been a tough year for everybody”.

 He  says going back into a period of restrictions, in the Auckland area in particular, is psychologically tough.

It is important we acknowledge that—this has been a difficult year”.

 So  is  Robertson  changing  his  tune?    After  all, for  months  he has been telling  us that  NZ  had  “gone  early, and gone  hard”,   the  government  had  “cushioned  the blow economically”  and  the  NZ  economy   has been   doing better  than   any of those  it normally compares  itself  with.

Robertson  has been  singing  from  the  same   song sheet  for   long enough  now he is  not  going to  strike  a  false note—-even  if it has  been  a “tough  year for  everybody”.

 Yes, there is a new outbreak,

“ … but we are getting it under control quicker than most, and every single day New Zealanders contribute to that”.

 Whoopee. Continue reading “Hurrah! We can all bounce back stronger together (and then we can think about paying back the borrowed billions)”

Robertson is confident about the benefits of spending – but what’s the story about the downside from borrowing?

So is the government succeeding in steering the country through the Covid-19 crisis and what it calls a “one-in-100-year shock”. And just what is it costing?

These are questions which will be uppermost in the minds of voters when they cast their ballots in next month’s general election.

Finance Minister Grant Robertson in Parliament this week assured the nation it is weathering the immediate impacts of Covid-19 “better than expected” — even though the full impact is yet to be felt.

He reckons the employment data this week shows the government’s plan to protect jobs and cushion the blow for businesses and households has protected the labour market from the worst effects of Covid-19.

According to Statistics NZ, the unemployment rate here ranks at seventh in the OECD, better than the OECD average of 8.4% and well ahead of Australia (7%) and the US and Canada (both at 13%).

Furthermore, the employment rate of 76.8% is currently fifth in the OECD, well above the average of 68.6%. Continue reading “Robertson is confident about the benefits of spending – but what’s the story about the downside from borrowing?”