RBNZ printed 71 Billion during Covid Response

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Forums › Finance and wealth management › RBNZ printed 71 Billion during Covid Response

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937 posts

Ultimate Geek

#2994630 11-Nov-2022 11:07

The OP and linked article were specifically about the quantitative easing and the amount of it - not the timing of when the RB began to hike the OCR. The hindsight refers to belated criticism of that easing - which almost no one did at the time.

networkn

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#2994631 11-Nov-2022 11:15

Earbanean:

The OP and linked article were specifically about the quantitative easing and the amount of it - not the timing of when the RB began to hike the OCR. The hindsight refers to belated criticism of that easing - which almost no one did at the time.

Your average Joe wouldn't understand the full impact of printing money, nor have access to enough information about the other things in the economy, which the Government obviously did. The average Joe should be able to trust the Government is making informed choices on their behalf and can reasonably be unhappy if those decisions proved to be imprudent or wildly off the mark.

What is the delay in printing money? Is it days, or weeks, months or years? Surely, they could have printed $15M at a time and seen how things went? If there was a bit of a delay they could have printed 30M and when they got to 10M left, ordered more to be printed.

This feels typically poorly planned and thought out from my perspective. A shoot-from-the-hip reaction.

GV27

5897 posts

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#2994632 11-Nov-2022 11:15

Earbanean:

The OP and linked article were specifically about the quantitative easing and the amount of it - not the timing of when the RB began to hike the OCR. The hindsight refers to belated criticism of that easing - which almost no one did at the time.

No one questioned it at the time because RBNZ forecasts were showing a cataclysmic scenario when that decision was made. It never eventuated, but we continued to act like it was right around the corner.

Even today, RBNZ is still missing the mark in inflation and wage growth forecasts.

The amount of easing makes the failure to hike the OCR faster than they did even harder to justify.

As long as the OCR is below the inflation rate, RBNZ is diverging from the Phillips curve approach.

There are huge issue around the credibility of RBNZ to restore the inflationary environment in NZ to a sensible level and these issues and on-going misses should not considered in isolation.

GV27

5897 posts

Uber Geek

#2994633 11-Nov-2022 11:17

RBNZ is still also making cheap cash available to banks through FLP at the same time as it is hiking the OCR, I might add. It's insane.

wellygary

8321 posts

Uber Geek

#2994635 11-Nov-2022 11:22

Earbanean:

The RBNZ is not the Government.

The Bank needed Government agreement/permission to engage in QE.. they were joined at the hip

Also the government had to underwrite and indemnify the bank's actions....

"because the Reserve Bank is part of the Crown’s balance sheet, it is necessary for an indemnity to be signed by the Minister of Finance."

https://www.beehive.govt.nz/release/govt-backs-rbnz-move-support-economy-lower-interest-rates

surfisup1000

5288 posts

Uber Geek

#2994645 11-Nov-2022 11:56

Earbanean:

surfisup1000:

It means a good deal of today's inflation is caused by government. Despite what they might say.

Next year will be horrendous economically... that money doesn't just disappear. . . it is all going directly into making goods and services more expensive.

The RBNZ is not the Government.

They are certainly a government organisation. The government sets the rules under which the RBNZ operates. The Reserve bank has lost focus, their remit has been expanded to consider full employment, climate change, Maori co-governance, etc. Price stability is secondary.

People are losing confidence in the reserve bank, which is not good. Staff turnover at RBNZ is higher than ever. Look at this recent organisation chart...that shows the senior managers that have quit or fled....

mudguard

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#2994649 11-Nov-2022 12:01

So pick a number. If the amount was half that, would we still be running at current inflation levels, or would it be halved as well? Seemingly governments all around the world all printed various amounts and as far as I can tell NZ still has one of the lower levels of inflation?

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surfisup1000

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Uber Geek

#2994674 11-Nov-2022 12:43

mudguard:

So pick a number. If the amount was half that, would we still be running at current inflation levels, or would it be halved as well? Seemingly governments all around the world all printed various amounts and as far as I can tell NZ still has one of the lower levels of inflation?

Yes, inflation would have been lower if they'd printed less. Switzerland has 2.9% inflation, yet, they also import energy.

The inflation story isn't over for NZ just yet....we've had the initial QE effect, next year we will see wage driven inflation which is quite possibly going to be worse as it is structural .

Bung

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#2994691 11-Nov-2022 12:59

surfisup1000:
People are losing confidence in the reserve bank, which is not good. Staff turnover at RBNZ is higher than ever. Look at this recent organisation chart...that shows the senior managers that have quit or fled....

How recent? Picking a name at random Mark Perry head of financial markets was gone by Jan 2019 according to a Herald article about the RBNZ leadership team reducing to 7 from 13. That's a year before covid.

mudguard

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#2994700 11-Nov-2022 13:19

surfisup1000:

Next year we will see wage driven inflation which is quite possibly going to be worse as it is structural .

How much of wage inflation is driven by a lack of immigration/temporary visas etc? Any? I tend to think now that we have no one coming in from overseas to fill roles we don't necessarily want to do, employers have had to crank up their wages.

I'm not sure if this applies to all sections of the workforce unless there was a lot of white collar workers that up and left before/during the lockdowns.

Earbanean

937 posts

Ultimate Geek

#2994701 11-Nov-2022 13:19

mudguard:

So pick a number. If the amount was half that, would we still be running at current inflation levels, or would it be halved as well? Seemingly governments all around the world all printed various amounts and as far as I can tell NZ still has one of the lower levels of inflation?

Ha ha, I think you're missing the tone of the thread. People aren't happy and they want to blame someone. That just happens to be Adrain Orr and/or Jacinda Ardern. The fact that this has happened all over the world, and as you point out, is much worse than NZ in many countries, is completely lost on most people here.

Liz Truss anyone?

surfisup1000

5288 posts

Uber Geek

#2994704 11-Nov-2022 13:26

Bung: How recent? Picking a name at random Mark Perry head of financial markets was gone by Jan 2019 according to a Herald article about the RBNZ leadership team reducing to 7 from 13. That's a year before covid.

RBNZ staff turnover under Orr is the highest since they started keeping records back in the 90's.

Within just 6 months, 10 of the 26 most senior employees left.

gzt

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#2994717 11-Nov-2022 13:34

RBNZ printed 71 Billion during Covid Response

This is a large number. Without any comparison it's basically meaningless.

KrazyKid

1238 posts

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#2994723 11-Nov-2022 13:55

You would be naive to believe that the government hadn't read the repot on how the reserve bank did before the reappointed Mr Orr.
They obvoiusly like what he has done and want more of it.

As for fault. I think the Resrve Bank of NZ followed that pack and did what most of the Western Countries did with QE.
The reserve bank followed "conventional" montary policy.

In the last few years.

Low interest rates meant that everyone was borrowing cheap money and spending.
Closed borders meant that employers could not hire.
Lockdowns meant firms then banks would have failed - who can survive 2 months with no income?
So government wage and employee subsidies for covid.
Events in the rest of the world meant Freight costs rose and Supply was cut back with lockdowns on top of the delays. (This = cost risess normally)
A war in Europe effected energy costs which has flow onto everything.

Of all of this the reserve bank can only change interest rates (QE and FLP to banks decreases interest rates basically).
The rest is external factors.

The government decied to close the borders and other decided countries locked down (hi China).

With the increased costs, yes RBNZ should have acted sooner and the the FLP contract needed a get out close clause, but most of these things above are out of their control.
But when to increase is a tricky question and much easier with hindsight.

We were one of the first to start rasing out cash rate this year. We raised our OCR in Feb, the reseve bank in the US started their rate rises in Arpil.

Overall I agree with the official report. Could have done bettert in hindsight, but acceptable for the unique times.

The National Party's critisim is mostly politics.

Batman

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#2994751 11-Nov-2022 15:41

KrazyKid:

You would be naive to believe that the government hadn't read the repot on how the reserve bank did before the reappointed Mr Orr.
They obvoiusly like what he has done and want more of it.

not rugby but sacking the coach is not a good look ;p

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