• rmacculloch

Now its the RBNZ's turn to spin - and it would make even a Public Relations firm blush

In an astonishing speech to the Real Estate Institute, the RBNZ Governor Orr went through each of the potential causes of house price inflation in NZ without ever, not once, even obliquely referring to the RBNZ's own $100 billion Quantitative Easing (QE) "money printing" program, that was cut prematurely short as it spiraled out of control.

Yet only a few days ago, award-winning business journalist, Maria Slade, wrote an article in the National Business Review with the heading "QE leaves Historic Stain on the Housing Market". She wrote that, "This $53 billion injection of liquidity into the financial system was like pouring petrol on a bonfire & house prices leapt skywards", according to Arthur Grimes". (Grimes is a former RBNZ Board Chairman). Maria contacted many of our nation's top economists as research for her article, "almost to a person, they concur with their esteemed colleague [Grimes] on the effects of the Reserve Bank’s unprecedented quantitative easing efforts, called the large-scale asset purchase (LSAP) program". A galaxy of former RBNZ officials at the very highest of levels, who I can't name since they don't wish to be associated with public commentary, were also left horrified by the QE program.

And internationally, a vast array of news headlines link Quantitative Easing with high house prices. Take the BBC, for example, "Was the Millennial Dream Killed by QE?". Its answer was that "the starkest impact of QE has been on wealth, the value of assets, from housing to pensions".

Yes, Quantitative Easing has become a debacle for the RBNZ, as we predicted it would, one that it is now attempting to airbrush from history. Why did it do it? Because as the quality of its staff, as well as the Monetary Policy Committee, degraded over time, due to political appointments overriding who was best for the job, the institution began copying what other Central Banks were doing, rather than working out what was optimal for NZ. In the Kiwi case, there was never an economic justification for QE, although a number of other Central Banks had decided that it was justified given their own particular country's circumstances.