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Many of us in the economics profession have long been questioning the poor qualifications & weak expertise of the Reserve Bank of NZ when it comes to our subject, which is the core discipline needed to run a Central Bank.


It's been an issue for me in terms of helping our economics students, since lots of budding, young, bright ones used to look up to the RBNZ as a place to start their careers. So the departure of top staff from the place in recent years, including the likes of John McDermott, one of our country's best, with a PhD from Yale University, has taken many of us aback. A majority of the Senior Leadership Team hasn't even done a degree in economics at all, let alone a PhD in the subject! The Chief Economist has a BCom.


In light of this serious matter, read the following flippant exchange at the Finance & Expenditure Committee between a Member of Parliament & the Governor, in which the latter links high staff turnover to the abolition of slavery (it starts at minute 36 of the video at this link https://www.facebook.com/FESCNZ/)


MP for Kaikoura, Stuart Smith: “Governor, you’ve got a very high turnover of senior staff. Is there a cultural issue in the Reserve Bank driving that? Have you had a good review of that? I assume you’re doing exit interviews. Hopefully an independent body is doing those interviews. What are they telling you?”


Orr: “Wow. Pointed question”


Smith: “I don’t have time to beat around the bush so if you could answer that’d be great.”


Orr: “We have the deputy governor Geoff Bascand retiring so that’s great news. Thank you Geoffrey. And Geoffrey will be available to all in due course to chat about everything that he’s experienced here. And likewise, Yuong Ha, our chief economist, who has chosen to go into a far more challenging role. What are you going to be doing?”


Ha (sitting next to Orr): “Coaching my son’s cricket team. Taking a break”


Orr: “And meanwhile we are well versed in attracting and retaining very very high-quality talent and staff and I’m very proud to have our deputy governor-anointed beside me here, Christian Hawkesby. I can leave the room if you want to talk to him about the culture.”


Smith: “You didn’t actually answer the question. Are you doing exit interviews and what are they telling you?”


Orr: “Yes, we do exit interviews and yes, we have continuous and real-time monitoring of the culture we want, we need, and how we are evolving. And we operate an incredibly transparent environment.”


Smith: “But the transaction costs of bringing on new staff continually and having that lack of experience – you’ve had some really good talent, but you really wouldn’t manage it in this way if you could.”


Orr: “No, but slavery has been abolished and people can choose to do what they wish and likewise I don’t employ a young 21-year-old Geoff. We will employ people who have experience also.”


If you watch the video, a bunch of the MP's present start laughing & appear to think it's all highly amusing. A joke. This line of questioning relates to the job market in economics & how it has gone pear-shaped in NZ, prompting many of our top economists to leave the country, give up the subject or not even study it at University in the first place. It's sad because it's the lives & livelihoods of many of our country's best & brightest that we're talking about, as well as expertise in a subject vital to help build a great future for all Kiwis.


Shame on the Members of Parliament present and the entire Finance & Expenditure Committee for the disrespect with which you have shown my profession today.

Today the controversy over the wage subsidy scheme has blown up (again). The NZ Herald reports that an investigation of "prominent law firm" Morrison Kent has "raised questions about the firm's retention of the Government's Covid-19 2020 wage subsidy as its billable amounts increased in the year to December 2020".


Back in May of 2020, together with a former Finance Minister, Sir Roger Douglas, we raised this issue in a co-authored article. The NZ Herald wrote at that time, "A report by former Finance Minister Sir Roger Douglas & University of Auckland Professor Rob MacCulloch released last week questioned why major firms needed the money when partners "have enjoyed years of high six (& sometimes even seven) figure salaries .. The pair added: "Why haven't they been required to fend for themselves & their businesses? Why, when the good times suddenly come to an end, have they gone cap in hand to the Government?"


On the back of this kerfuffle, the likes of Bell Gully, Simpson Grierson & MinterEllison RuddWatts hastily repaid millions of dollars. However I never knew that there were still law firms who had not repaid the subsidy. So DownToEarth.Kiwi calls upon all law firms who took the wage subsidy to tell the nation what your partners earned last year.


Or will you hide behind legalistic words like "private", "confidential" & "commercially sensitive" to thwart the request? Well, on that note, you've all got a problem. A big one. Once you took public money, you no longer became free-standing private enterprises. Just like the big banks that took public money after the Global Financial Crisis, your judge & jury became the court of public opinion. The current media articles are now trying you in that court.


By way of technical note, your defense case is way weaker than for big public companies like Fletchers who took the wage subsidy, since their boards can argue that they were acting on behalf of the shareholders & had a legal obligation to take it to support shareholder value. But when it comes to legal or accounting partnerships, their boards are their owners, so they're not acting as agents to (shareholder) principals to whom they owe a fiduciary duty - only to themselves. In other words, it's solely their own personal ethics at issue.


So again, what did your partners earn last year? I'm sure the Kiwi public, many of whom are very hard up yet who still funded the subsidies which your firms received would appreciate an answer, so they know where their money went.


Sources:

https://www.nzherald.co.nz/business/bell-gully-becomes-the-third-major-law-firm-in-a-day-to-say-it-will-repay-the-wage-subsidy/CITDHEBQTHGEBQF2BFUY7CWFEA/


https://www.nzherald.co.nz/business/complaints-laid-with-law-society-against-law-firm-morrison-kent/566P3WEPDVBBBXOPWZFMJEPCGE/

 

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