The speech ostensibly charted a path forward. However, conspicuous by its absence was any meaningful acknowledgement of its responsibility for New Zealand’s current economic predicament.
The presentation was long on technical details but short on accountability. The latter is emblematic of the RBNZ’s broader stance on its role in three critical problems: the worst inflation in three decades, the country’s dismal economic performance and the staggering $11.5 billion losses from the Bank’s reckless money printing in 2020 and 2021.
In its own self-review, published in late 2022, the RBNZ had given itself a pass mark for its actions during the pandemic. But despite engaging two peer reviewers (both former central bankers), this was never going to be an independent, critical assessment. It certainly did not come across like that.
Criticism of the RBNZ’s policies is not merely hindsight. The New Zealand Initiative, with other economists, has been sounding alarm bells for years. In August 2019, we published The Unreserved Bank of New Zealand, warning about the risks of unorthodox monetary policies and the RBNZ’s shift away from its previous focus on price stability.
Throughout 2020 and 2021, we cautioned against the RBNZ’s aggressive monetary stimulus. In April 2020, we emphasised that “deficit spending funded by borrowing from the central bank that is not expected to be reversed is a route to financial instability”. By May 2021, we were already warning that the new era of RBNZ policy would “end in tears and inflation”.
We were not alone. Tools like GDPLive provided real-time data and Taylor Rule calculations, clearly showing the RBNZ’s deviation from prudent monetary policy. The RBNZ chose to ignore these warnings.
The consequences now are severe: New Zealand faces home-grown inflation, economic stagnation and a massive burden on taxpayers, affecting everyday lives.
The RBNZ's reluctance to own up to these failures is concerning. Its attempts to shift blame onto external factors do not stand up to scrutiny.
In politics, significant failures often lead to demands for accountability. Why should it be any different in monetary policy? The RBNZ’s decisions have profound impacts on the national economy.
To restore confidence and set a course for recovery, we must demand more and better from the RBNZ.
The road back to 2% inflation requires more than technical analysis and forward-looking projections. It demands a clear-eyed assessment of past errors, a commitment to learning from them and a strong focus on the Bank’s price stability remit.
New Zealanders deserve a central bank that learns from its mistakes, not one that buries them.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
In its own self-review, published in late 2022, the RBNZ had given itself a pass mark for its actions during the pandemic. But despite engaging two peer reviewers (both former central bankers), this was never going to be an independent, critical assessment. It certainly did not come across like that.
Criticism of the RBNZ’s policies is not merely hindsight. The New Zealand Initiative, with other economists, has been sounding alarm bells for years. In August 2019, we published The Unreserved Bank of New Zealand, warning about the risks of unorthodox monetary policies and the RBNZ’s shift away from its previous focus on price stability.
Throughout 2020 and 2021, we cautioned against the RBNZ’s aggressive monetary stimulus. In April 2020, we emphasised that “deficit spending funded by borrowing from the central bank that is not expected to be reversed is a route to financial instability”. By May 2021, we were already warning that the new era of RBNZ policy would “end in tears and inflation”.
We were not alone. Tools like GDPLive provided real-time data and Taylor Rule calculations, clearly showing the RBNZ’s deviation from prudent monetary policy. The RBNZ chose to ignore these warnings.
The consequences now are severe: New Zealand faces home-grown inflation, economic stagnation and a massive burden on taxpayers, affecting everyday lives.
The RBNZ's reluctance to own up to these failures is concerning. Its attempts to shift blame onto external factors do not stand up to scrutiny.
In politics, significant failures often lead to demands for accountability. Why should it be any different in monetary policy? The RBNZ’s decisions have profound impacts on the national economy.
To restore confidence and set a course for recovery, we must demand more and better from the RBNZ.
The road back to 2% inflation requires more than technical analysis and forward-looking projections. It demands a clear-eyed assessment of past errors, a commitment to learning from them and a strong focus on the Bank’s price stability remit.
New Zealanders deserve a central bank that learns from its mistakes, not one that buries them.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
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