The Royal Commission on Covid-19 Report is a Repugnant, Unstructured Mishmash of Disinformation, Dressed up as a Single Source of Truth.

How can Professor Blakely, who is co-author of NZ's Royal Commission Report into Covid, write a report critiquing our government's approach to Covid when he was the intellectual architect of that approach? He co-authored the 2020 British Medical Journal article with Professor Michael Baker called, "Elimination could be the optimal response strategy for Covid-19". That paper falsely claimed, "A goal of eliminating community transmission of the pandemic virus causing covid-19 is achievable and sustainable". It was not sustainable. The paper asserted elimination "will be facilitated by the introduction of effective vaccines". Bollocks. Funny how my father, who's been three times vaccinated, is in bed today with Covid. I must be imagining it. Let's not let facts get in the way of a good narrative. Profs Baker and Blakely asserted in their paper, "One of the perceived barriers to applying .. elimination .. is the belief that this might sacrifice the economy .. Our preliminary analysis suggests the opposite is true .. the effect on GDP .. was more favorable for countries with elimination goals than for those with suppression goals". God oh dear. Seems Blakely, who lives in Aussie, has never heard about how the bottom has fallen out of NZ's economy. The paper by Baker & Blakely was used by Finance Minister Robertson to support the view that elimination meant good health outcomes & good economic outcomes went hand-in-hand. "We're protecting lives & livelihoods", he said. This Blog argued at the time it was a load of rubbish. The government responded by setting their media attack dogs onto us.

At the start of the Royal Report, on page 3, it says, "A generous economic response cushioned people from the worst of the pandemic’s immediate impacts - initially at least – NZ’s social & economic outcomes were better than most OECD countries". How slimy to slip in the word "initially". On it goes, spewing pompous, intellectually pretentious twaddle that seems to have been written by someone who's never studied economics, at least properly. It says, “NZ's [economy] is doing pretty well in a global context if you’re just talking about levels of credit ratings.” What does that mumbo jumbo mean? The Royal Report dare not mention how NZ is near bottom of 190 nations in terms of how fast GDP is growing, according to the IMF. There are only around 10 nations below us, most of them in civil war, like Yemen. Best to leave that "truth" out. But hey, Profs Baker & Blakely were part of the "podium of truth" back in 2020 and 2021. Now with this report, it seems they're still in the "podium of truth" game, lecturing us how our economy's doing fine - just focus on the credit ratings. I'm sure Kiwis are thrilled to hear the government isn't bankrupting, when they are, and thrilled to hear government debt has a higher credit rating than the average Joe's. But look, as former PMs Ardern and Hipkins would advise, go read the Royal Report - its "science". Stay away from nonsense on the web and quack economists like me. For your Single Source of Truth on how Covid affected our economy, written by non-economists who were the Single Source of Truth during Covid, read the Royal Report .. and be brainwashed.

Is the OCR at the "right" level in New Zealand? A comment from one of our Blog Readers, and a reply.

One of our Blog readers, a top notch Wellington economist called Matthew Williamson, who I trust doesn't mind me writing his name, has commented on yesterday's provocative Blog in which we argued the RBNZ was not sticking to its new mandate. That mandate, laid down by the Finance Minister this past year, requires the Bank to focus solely on ensuring inflation is around 2% (i.e., the mid-point of its 1-3% range). Since inflation is already there, we asked the question: what is the Bank up to with its rate cuts? My suspicion is that its panicking over how the economy is in a stagnant state and is desperate to get it growing again (which is not in its mandate). Matthew's comment is:

"You refer to the OCR being at the midpoint of the target band, and therefore say the RBNZ should not cut the OCR, as it is clear they are doing so to stimulate the economy. But isn’t the issue with this that the OCR needs to be forward looking? It takes 1.5 – 2 years for any cuts or increases to work their way through the system. Does the NZ economy of 1.5 – 2 years from now need stimulus? The OCR is currently still above the RBNZ’s estimates of the neutral rate. While admittedly I haven’t had time to read yesterday’s MPS yet, the bank did discuss deflationary downside risks in their previous MPS. A sluggish economy with high unemployment in the context of surprisingly stable and fairly low oil prices does not a recipe for inflation make".

Its a great argument - Matthew has outlined exactly how the RBNZ would defend its 50 point basis point rate cut this week. It would say that, should the OCR rate have been held at 4.75%, then that's above the "neutral rate" (at which inflation is neither rising or falling). So it needs to cut further to ensure inflation doesn't fall beneath its 2% target, especially on the back of a forecast sluggish economy, which may cause inflation to fall even more.

My view is that Matthew's correct - but its not the full story. The other half of the story is that a cover-up is in play & the RBNZ is bamboozling Ministers and public with quasi-scientific arguments that introduce complicated concepts like "neutral rates", which Parliament's Finance & Expenditure Committee don't have much clue about. The past four years have seen the RBNZ erratically swing like a caged monkey. First, it wildly slashed rates close to 0 and did a $50 billion cash printing program during Covid, fanning inflation and driving an out-of-control bubble in the NZ property market (at its height, average prices in Wellington hit $1 million). That took Governor Orr off-guard (he told Bloomberg no such risk existed because its "a different world now") to the extent he panicked again & hiked rates through the roof to "engineer a recession". He did way more than that - he engineered 3 recessions and created mortgage distress & bankruptcies up & down the country. Now he's in another state of shell-shock, desperately trying to kick-start the economy which has become one of the slowest growing in the whole world. Truth be told, Orr doesn't much care about inflation now - its already under control - what he cares about is getting the economy growing so people don't loathe him so much. So, in my view, yes he would defend his actions in the elegant scientific way Matthew beautifully outlined, but its only part of the truth behind the shambles that has become Monetary Policy in NZ.