Michael Reddell: Fiction and spin

I had in mind another post for today, but this morning we had something rare: a speech about monetary policy from the Governor of the Reserve Bank, delivered in Washington at a think-tank which appears to have been hosting many speakers this week (in town for the IMF World Bank Annual Meetings). On their schedule, the Deputy Governor of the Banque de France was speaking earlier in the afternoon (some very interesting material in her presentation) and the Prime Minister of Liechtenstein a bit later.

The Governor’s wife writes fiction (several books published) and teaches creative writing. Entirely laudable and there are often powerful insights in great works of fiction. But when – as her husband does – fiction and sheer spin are dressed up as serious accounts of policy stewardship etc, the only possible insight is into the character of the chancer who tries it on. And perhaps those who enable him (one could think of Neil Quigley and Grant Robertson, but also now (sadly) of Nicola Willis).

But first a point to his credit. Climate change, for example, didn’t get mentioned even once in the speech. Or the treaty of Waitangi. It had the appearance of a straight up and down speech about monetary policy stewardship, as advertised (“Navigating monetary policy through the unknown”). And, if you recall how he used to tell people (well, Parliament actually) that the Russian invasion of Ukraine was to blame for the worst New Zealand inflation in decades that line has now been quietly minimised too.

Consistent with his revealed preference for fictional embellishments, Orr builds his speech around the navigational challenges faced by ancient mariners, in his case primarily Kupe. Orr claims to know that Kupe had a clear goal in mind, and whether he did or not, (I guess he could have used Captain Cook too) but – technology having moved on – he wasn’t reliant on the sea birds etc. It still seemed a rather strange analogy to use, in 2024, in an age of GPS. Then again, I guess it is only a couple of weeks since the HMNZS Manawanui ran onto the reef, so perhaps it isn’t such a bad analogy for New Zealand monetary policy after all. Perhaps the salvage will be done well, at considerable costs (perhaps lingering costs for the people of Samoa) but the ship never should have ended up on the reef in the first place. Those responsible for the loss of a ship face courts of inquiry, perhaps even a Court Martial.

But in Orr’s fictional world central bankers – New Zealand central bankers, since his speech does actually concentrate on New Zealand – are heroes, having delivered us to the least-bad possible outcomes through the storms, vicissitudes and other uncertainties of the last few years, where anything bad was no one’s responsibility, and anything good was to the credit of the wise and respected navigators, led by Orr himself. It was pretty breathtaking stuff really – although questionably persuasive even as fiction – as there is no longer even a hint that anything could have been done better, by our courageous central bank navigator, than it was. When the Bank reviewed its own performance a couple of years ago, they then thought it prudent to acknowledge the odd small error, even while claiming that none of it mattered much. But no longer apparently.

In his celebratory self-congratulatory mood – he claims to have saved us from two deep recessions – his overseas listeners would have had absolutely no idea that on the IMF forecasts that came out yesterday, New Zealand’s real per capita GDP growth in both 2024 and 2025 is estimated to be among the worst in the world, down there with places like Yemen and Haiti. Or that on those same IMF estimates, New Zealand will have been one of the very worst performers over the entire 2019 to 2025 period.

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Now, to be fair to the Governor, one can’t blame underlying long-term productivity problems on the Reserve Bank, but equally no one really doubts that those 2024 and 2025 outcomes are mostly on monetary policy: the consequences of the Bank belatedly waking up to its past mistakes, and doing what it took to get inflation back down again. And, frankly (although the Governor won’t tell you this) anyone can get inflation back down: the trick (the reason we delegated the job to supposed experts) was never letting it get away on you (well, on us, the public) in the first place.

The spin, and utter avoidance of any responsibility, begins earlier, in fact with the Bank’s covering press release, which presumably captures the key lines Orr would like to see reported here.

First, there is this framing

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Followed up in the speech with this extraordinary admission from someone charged with keeping inflation near 2 per cent.


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Now, I don’t doubt that briefly in early 2020 perhaps the MPC really believed that the alternative to them acting as they did was economic disaster, but it was very quickly evident that that simply wasn’t the case. Economic indicators here rebounded quickly and early. And the MPC did nothing to start to pull back on the excessively loose monetary policy until late 2021 (it wasn’t until into 2022 that the nominal OCR was even lifted back to the immediate pre-Covid level by when inflation and inflation pressures were already running away on them): they now estimate the positive output gap was in excess of 3 per cent by late 2021. If we want to play with nautical analogies, Ulysses steered his way between Scylla and Charybdis. Orr and his team ran us onto the rocks (full blown inflation, fixed only at great cost). And he claims to have been now quite relaxed about those hugely and disruptive inflationary consequences, with all the attendant arbitrary redistributions.

And then, still with the press release, there is this

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Inflation simply was not “caused by COVID-19”. With all their comms staff, this is very unlikely to be a slip of the pen, rather it is yet another in the endless series of attempts to avoid actual responsibility for doing the highly-paid job they took on so badly. No one doubts that Covid provided a context where many policymakers had to make difficult calls in conditions of great uncertainty. But it was the Reserve Bank MPC’s calls, faced with all that uncertainty and the decisions of others (since monetary policy moves last, by construction), that delivered the worst inflation in decades and the attendant cost and disruption to getting it down again. But Orr can’t or won’t admit that.

As the work fiction continues, there is no mention of the LSAP – just a couple of passing lines about how quantitative easing tools hadn’t been used in New Zealand before – or the $11 billion of losses the MPC’s choices imposed on the New Zealand taxpayer (as someone pointed out a couple of weeks ago, one could build three Dunedin hospitals for that price), and of course none of the way in which the Bank went on provided concessional lending to banks to the very end of 2022. No doubt, if challenged, Orr would bluster and repeat his utterly unsubstantiated claims that the LSAP made a big positive difference to New Zealanders, but on this occasion his fictional treatment just airbrushes it away.

I spluttered when I came to this paragraph

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He chooses not to mention to his overseas audience (or to remind local readers) that his own reappointment was formally opposed by the two Opposition parties in Parliament at the time or that – as in many other countries – public discontent and inflation and the cost of living registered extremely high in opinion polls throughout, arguably playing a role in defeating the government here last year. It is hard to find anyone with any subject expertise who has any confidence in Orr (I’d mention Orr’s board, who seem to, but hardly any of them have any subject expertise).

(In case you are wondering quite what he meant, Orr’s idea of “mutiny” appears only to involve troublesome inflation expectations).

The creative writing continues as we move towards the end of the speech.

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Has anyone ever associated Orr and his public communications with the word “humility”? Perhaps we might all take this as less like make-believe if it weren’t so well-documented just how many times Orr has actively misled Parliament’s Finance and Expenditure Committee (charged in part with holding him to account), or if he didn’t send out his chief economist to say “oh no, we didn’t really mean what the numbers say, and anyway it isn’t our fault but that of the tools”. Nothing, you see, is ever the fault of Orr and the MPC…..at least in this fairy tale.

It goes on.

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I’m wondering how Martien Lubberink, Roger Partridge, Jenny Ruth or Nicola Willis (in her Opposition days) feel about their experiences of Orr as empathetic communicator? Disdainful bullying is probably a fairer characterisation of his style. And as for the rest of the MPC, all these supposedly-expert external members sat on the MPC right through this extreme period, and none of them ever said a word….no speeches, no serious interviews, no scrutiny by Parliament. Nothing.

Orr has the gall to then claim that it is really all in the minutes (the “Record of Meeting”) and that is only a shame that so few people, even “economic experts refer to or query” it. Which is, of course, nonsense on stilts, and just more active make believe. People read the Record of Meeting but they just don’t find much there. Despite all the uncertainties that Orr makes much of, there is never a serious sense of that in the Record of Meeting. Oh, they talk a good game, but when there is real uncertainty about important things, really able smart and engaged people will – with all goodwill – reach quite differing conclusions about where to next, and what the latest data probably mean. There is just none of that. The grapevine reports claim that there is in fact vigorous debate in the MPC, but there is not the slightest evidence of it shown to those us press-ganged into enduring the consequences of their bad calls. If the MPC really was unanimous on all but one call in the last five years, that is a very poor reflection indeed on the MPC members (some of whom are simply unfit for office, but from a couple one might have hoped for a bit more) and their chair. If not, the Record of Meeting is just comms spin.

I could go on, but will draw this to a close here. Somewhat remarkably – well, perhaps not in the fictional world Orr would prefer to draw for us – there is no mention of accountability. It was always supposed to be the price, the quid pro quo, for delegating a great deal of constrained power to central banks. Accountability was supposed to involve real consequences. And yet, through the biggest and most costly monetary policy misjudgements in decades, Orr would just prefer no one mentioned anything about accountability (or in fact about mistakes at all). I guess it is the New Zealand public sector way (as we seeing again now in the wake of revelations of obstruction and cover-ups in the context of decades of abuse of people in state care).

When captains of naval vessels made mistakes and ran their ship onto the rocks it was often considered fitting, and not inappropriate, for the captain to go down with his ship. But barefaced creative fiction, with not even a hint of contrition or regret to add nuance to the manuscript, seems to be Orr way.

Michael Reddell spent most of his career at the Reserve Bank of New Zealand, where he was heavily involved with monetary policy formulation, and in financial markets and financial regulatory policy, serving for a time as Head of Financial Markets. Michael blogs at Croaking Cassandra - where this article was sourced.