RBNZ governor must curb inflationary pressures while keeping an eye on employment trends

Reserve Bank governor  Adrian Orr   has  a lot on his  plate  at present. He  is  battling  to hose  down prices which have  been rising  faster  than they  have  done for  30  years,  while  at  the  same  time  “maximising” sustainable   employment.

It’s  a  task  none of his predecessors had  to undertake.  Finance  Minister Grant  Robertson  widened  his  remit  to include full employment, but probably  didn’t  expect the  job  being put  to the  test so soon.

And, of  course,  Robertson’s future  as  finance  minister  will  hang  in the  balance, particularly  if  inflation  is  still raging  when  electors  go the  polls  next  year.

Ironically, too,  it  was the   government’s decision for  the  printing   of  money  by  the  Reserve  Bank  as  the  country  returned  to  something  like  normal  after  the Covid  lockdowns, which  stoked  the fires  of inflation.

Some  might  see   elements  of  Greek  tragedy   taking  shape.

While our Finance Minister enjoys the Games, our living costs are high jumping and too many Kiwis are tripping on the hurdles

Deputy  Prime  Minister  Grant Robertson had  some  fun  last  week  at  the  expense  of  National  leader  Christopher Luxon  for  holidaying  in Hawaii  while  a  Facebook entry  indicated  he  was in  Te  Puke.

This  week  Robertson  is  relishing the  spectacle of  the  Commonwealth  Games, and  the   achievements  of  New Zealand’s  sports stars.

He  may  even  succeed  in  forgetting,  at  least  for  a  short  while,  the  economic  mess that is mounting in  NZ – not  that   he  will   concede  he  has  had anything  to  do  with   inflation  breaking  into a  gold-medal-winning gallop  on his  watch.

Moreover, he  keeps  insisting it  has  already  past  its  prime.

Only  last  week  he  was  telling  his  acolytes  in  Parliament that  while the  government is acutely aware that many New Zealanders are doing it tough,

“… we are taking action to support them.

“We’ve boosted the incomes of seniors, students in low-income families, while a million New Zealanders are receiving the winter energy payment. From next Monday, the targeted cost of living payment will deliver around $27 a week for low and middle income New Zealanders aged 18 years and over who don’t get the winter energy payment.

“In response to high fuel prices, which have been significantly driven by the war in the Ukraine, we have cut the fuel excise duty and road-user charges and halved public transport costs.

Latest food price figures reinforce the economic-performance criticisms Opposition can fling at the Govt

“America’s next downturn  may have a mild flavour—but a bitter aftertaste”.  So  ran a headline in The Economist.

Juxtapose that to New Zealand, and  we  could be  served  a  double dose  of the bitter  aftertaste.

The  problem  here is  that the  authorities apparently didn’t  see it  coming and  now,  as  it  arrives, they could  be  slow  out of  the blocks in dealing  with it.

Prime Minister Jacinda Ardern kept  denying  there was a  cost-of-living  “crisis”.

After its impact nevertheless could be seen to be hitting  home, the Finance Minister  tacked on  to the  budget  some  measures he  hoped  would assuage  any  pain being  felt by  New Zealanders — although  the  queues  at  foodbanks  were already  lengthening.

The latest food price index shows a 0.7% increase in food prices for the month of May.  Food now costs 8.9% more than at the time of the last election and fruit and veges cost 16% more.

That  has  given Opposition parties a  free  hit  at the  expense of the governing party.

Mortgage holders will wince as RBNZ takes another shot at bringing inflation back into the target zone

The  Reserve Bank  has  raised  the  official cash  rate  to  2% – but will  that  slay  the  inflationary  beast roaming  the  countryside.? 

Point of  Order   doesn’t  think  so.

Reserve Bank governor  Adrian  Orr made  the right  belligerent  noises  as  he  fired  the  bullet  today  but  he  needed  a  fiscal -policy volley  from  Finance Minister Grant Robertson  to  demolish   the  monster.

Inflation, according  to Robertson,  is  all  due  to overseas  factors — the  war  in the  Ukraine, supply  chain  congestion,  China’s  economic  problems,  you  name  it  — but  little  has  been  done  to  contain  it in  the  term of  the  Ardern  government.

As Professor  McCulloch pointed out  in the  NZ  Herald with reference to a  document  signed  off   and “agreed by”  the Finance Minister and Reserve Bank Governor, it says inflation in NZ is to be held at 1 to 3 percent over the medium term.

RBNZ on the back foot as inflation rises – but consumers are struggling on a sticky wicket, too, as food costs soar

Reserve Bank “not in a  good  place”, admits  governor.   This  was  the  headline  Radio NZ  News  ran over  a  report of  RBNZ governor Adrian  Orr  speaking  to an International Monetary Fund  seminar.

He  might have  added  that the average  Kiwi consumer  is  “not  in  a  good  place”, either,   when doing the  daily  shopping,  with  food  costs soaring  and  inflation  rising at  a faster  rate  than  it  has  for nearly  30  years.

But isn’t  it  Orr’s  job to  keep  inflation  under  control – or can he pass the buck (as it shrinks in value) to the Monetary Policy Committee?

And whatever happened to the inflation target?

Orr  does  concede that  the  RBNZ  was caught on the back foot,  but argues  that was the same for many other central banks, as a  result of supply chain shocks and the Russian invasion of Ukraine, which had exacerbated inflation pressures.

Moreover, he  contends the RBNZ had been “reasonably aggressive” in ending its bond-buying programme last year and moving to lift the official cash rate,  and is also balancing risks.

Baa humbug! Demand for sheep milk is “booming” but taxpayers are being milked to help a Maori collective invest in the industry

As Minister of Agriculture, Damien O’Connor has dipped into one of the troughs in his bailiwick to nurture a Maori sheep-milk enterprise.  As Minister of Rural Affairs, he has declared a medium-scale adverse event in cyclone-battered bits of the North Island.

This declaration (he announced) enabled the government to dip into other troughs to provide support for farmers and growers hit by the storms.

For starters, a modest – almost trifling – sum of $200,000 was made available for local Rural Support Trusts and Mayoral Relief Funds to use to help recovery efforts in Taranaki, Wairarapa, and the Waitomo district.

Damien O’Connor popped up again to announce state support for Māori landowners to invest in New Zealand’s rapidly growing sheep milk industry.

“We are backing the Māori Agribusiness Sheep Milk Collective, which has ambitious goals to have multiple farms milking about 25,000 sheep and potentially employing more than 100 people by 2030,” Damien O’Connor said.

“Global demand for sheep milk and sheep milk products is booming. Exports of New Zealand sheep milk products were valued at $20 million in 2020.”

But if business is booming, why is government funding needed by the 20 collective Members, comprising Māori Land Trusts and Incorporations that own primary sector assets with a combined area of more than 24,000 hectares of land stretching from the western shore of Lake Taupō to the Hauraki Plains?

Good question.

Labour is giving opposition politicians plenty of issues to exploit as it is stalled by ‘an end-of-year fug’

If  it’s  true  that Labour’s great run is  now  ending,  Opposition parties  should  be vibrating  with  new-found  confidence.

This  may be the   case   with  ACT,  but  so far  there has  been  little sign of  it in National.  In fact   judging  by  the  volume of  speculation  about  National’s leadership  among  the  political  cognoscenti  in  the  weekend  media, the  inner  circle of  the party is stressed  out over  its  leadership.

A  party on top of  its  game certainly would  be  scoring  some   big  hits. On the  other  hand  it  may  be  argued that  the  preoccupation with  Covid has stifled interest  in other political  issues.

Still, as  economic uncertainty  deepens, and  managing the  Covid  Delta  variant  exposes the  government’s vulnerability, the   country  is  looking   again for  something  different,  if only  to  measure  accurately how  the government is  performing.

Beyond  the  leadership issue, the  problem   for  National   is  that it  does  not speak  to  all  elements  of  its  base. It  appears  singularly  out of  tune with  the  regions  and particularly   with  farmers, who are  facing  vocal  lobby groups campaigning  against  what they call  “dirty  dairying”—  never  mind  it is dairy export earnings  that  are sustaining the country’s  balance of payments.

NZ has yet to announce climate-warming pledge for Glasgow summit but RBNZ is developing guidance for our finance sector

The clock is ticking on global warming, the  Dominion-Post  warned this  week ahead of  the Climate Change Summit in Glasgow. 

The  opening  paragraph  of  the  report  was  ominous: 

“Even after  countries — excluding NZ — unveiled  ambitious new  pledges  to  cut emissions,  it’s still  not  enough to achieve the global of 1.5 degrees  Celsius of climate warming,  a  new  report  found.”

The  article  points  out that NZ  has been  notably  absent   from the burst of  announcements that have been made, but  suggests we may  make our declaration in Glasgow.

It  argues that, as  a  small economy,  NZ’s nationally determined contributions (NDCs) will  not sway  the  dial  much.

But Green  co-leader  James Shaw,  who is  representing  NZ  at  the  conference, may  find anything he says is not  greeted  with applause.  NZ, like  Australia,  is  regarded  as  a  laggard  on  climate  change.

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.

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”.