• rmacculloch

The Inflation Plot Thickens: The RBNZ & Robertson may yet be proved guilty

Way back in the middle of last year, we were forecasting high inflation in NZ, fully breaching the country's agreed targets, at the same time as the RBNZ & Finance Minister were not. We questioned the Monetary Policy Committee's repeated characterization of Kiwi inflation as "transitory". We have long disagreed with the Finance Minister's assertion that most of our inflation is being driven by external shocks completely outside of his control.

Now a former Chair of the US President's Council of Economic Advisers and Head of the Harvard Economics Department, as well as author of the world's most popular economics textbook, Greg Mankiw, is arguing along similar lines. Last Friday he asked:

"A common story about the recent inflation surge in the US - especially among members of Team Transitory - is that the surge is largely due to global supply shocks, such as rising energy prices, chip shortages, and various bottlenecks in the wake of the worldwide pandemic. Why then do we not see a similar inflation surge in Japan? There, inflation is running at about the same rate as it was pre-pandemic (see below)":

I can fully understand the Finance Minister politicizing the causes of high inflation in NZ. He's a politician! But why is the RBNZ also politicizing the causes? Why isn't it doing proper research to work out what is behind our 7% inflation figure? Why is the Bank not connecting it whatsoever with its $53 billion Quantitative Easing Program? Isn't it the job of the RBNZ to find out the truth - with the public interest in mind - rather than acting like a political party?