• rmacculloch

Time for the (Underqualified) Managers at the Reserve Bank of NZ to Resign

According to data released just a few months ago in May, the RBNZ was predicting the unemployment rate would stay the same throughout 2021/22 at 4.7%. (See Table 6.5 on page 46 of their Monetary Policy Statement below). As a result of this forecast, the Monetary Policy Committee observed how "unemployment remains above its pre-COVID-19 levels" and decided to maintain "the current stimulatory level of monetary settings in order to meet its consumer price inflation and employment objectives".

However yesterday Stats NZ reported that the unemployment rate is instead at 4.0%, below where it was in the middle of 2019. The RBNZ got it all wrong. Now in the middle of the biggest loosening of monetary conditions in the history of the country, the Reserve Bank has become the Reverse Bank and the talk suddenly is of a tightening. The effects of the choking of the labour market caused by closed borders and vast skill shortages reported up and down the country, on top of the reckless $100 billion Quantitative Easing Program, appear to have been obvious to everyone except for the managers at the RBNZ.

And if MP's like Chloe Swarbrick and Nicola Willis thought RBNZ forecast errors regards house prices were bad, this one is even bigger since its of the order of nearly 20% (that is, 0.7/4.0). By the way, this comment is made without the benefit of hindsight - the situation was already clear in May which is why DownToEarth Kiwi commented on it back then.