The Finance Minister responded to the NZ Initiative report released yesterday, called "How Central Bank Mistakes after 2019 led to Inflation", by former Bank Governor Graeme Wheeler & Bryce Wilkinson, with a line that is incorrect.
The National Business Review report Finance Minister Robertson said (at his stand-up on the way to parliament), ".. the NZ Initiative report (which blamed the RBNZ for the inflation we now have) is an exercise in hindsight economics”.
Wrong. Three years ago, in 2019, the NZ Initiative wrote a report called "The Unreserved Bank of NZ: Why Unorthodox Monetary Policy Needs Boundaries" which warned of the exact situation we are in today. That report, authored by the Executive Chair of the Initiative, Oliver Hartwich, their Chief Economist Eric Crampton, and myself stated:
"When the RBNZ cut the Official Cash Rate (OCR) by 50 basis points on 7 August 2019, The Sydney Morning Herald headline called it "Shock and Awe Kiwi Style" .. More frighteningly still, the RBNZ seized the opportunity to prepare the NZ public for further monetary easing. Given the already low level of the OCR, this would mean moving towards unorthodox measures such as negative interest rates & large-scale asset purchases. There is a subtle irony that the RBNZ is already flagging a revolutionary new phase of unorthodox policy while still not communicating its conventional policy transparently .. In August 2019, following the OCR cut and having released the Monetary Policy Statement (MPS), the Governor reiterated that the option of unconventional policy was developed" (the full report is below).
Yes, the RBNZ was flagging future negative interest rates and Quantitative Easing even before the Coronavirus Pandemic. The NZ Initiative fully warned the Finance Minister of the implications. We had perfect foresight. There is not one grain of hindsight in the Wheeler-Wilkinson Report, contrary to the Minister's assertion.
It's not just the Finance Minister. The RBNZ stated yesterday, "I [the Governor] regret that the [Monetary Policy] Committee - and society at large - has been confronted with the COVID-19 pandemic, and other recent events that have caused food and energy price spikes". However, as we have just seen, RBNZ money printing was on the cards before the pandemic and before the war in Ukraine!
As for forecasting the rise in inflation, this blog commented in April 2021, "Our prediction is that the cost of living is on the way up in NZ and interest rates will be going up sooner rather than later". In May 2021 we wrote, "Amusingly (if that's the right word?) the RBNZ's Monetary Policy Committee seems to be the only group in the country which doesn't think prices are on the rise". Why? Since in May 2021 the ANZ's Business Outlook survey showed inflationary pressures were soaring. "Reported costs are through the roof", said ANZ chief economist Sharon Zollner".
And these statements were made whilst the RBNZ was still printing money!
So Hindsight Economics, is it, eh Grant? No, that's your style of economics. Folks like Wilkinson, Hartwich & Crampton at the NZ Initiative, former Governor Wheeler & me, we do Foresight Economics. We do so to try to prevent inflation & cost-of-living crises like the one you threw us into. We put in effort to help serve the public interest - my work for doing so is unpaid - and all you can do, Grant, is put us down for political purposes.