Mike's Minute: "Why risk choking off what little we currently have?"

To the Reserve Bank, the cash rate and the state of NZ Inc.

It's assumed by most that the cash rate will be increased 25 points to 2.75%.

It's also assumed there will be another one by the end of the year. What happens after that has a “who knows” feel about it.

Dr Don Brash: Why The Reserve Bank Should Remain Focussed On Inflation

As we approach the 2026 election, both Labour and NZ First want to change the Reserve Bank’s monetary policy mandate from its current single focus on the control of inflation to a dual mandate - controlling inflation while also maximising employment.

And to a great many people that sounds like a sensible change.

But it's not.

David Farrar: Ruth calls it straight

Ruth Richardson writes:

As inflation rears its ugly head again, New Zealand First proposes stripping the Reserve Bank of its sole mission to fight inflation. In an exercise in virtue signalling, employment is bolted on as a second mission. Labour’s Barbara Edmonds wants the same.

This is sheer monetary policy vandalism, flying in the face of all the evidence that there is no trade-off between price stability and employment. That monetary policy can permanently deliver employment growth is nothing more than a cruel hoax.

Mike's Minute: I'm not convinced the Reserve Bank was right

You can't bag the Monetary Policy Committee.

Well, you can, but in this case, you would be fairly churlish.

Personally, I would have held, but given the vote was done by consensus I clearly would have been a lone voice.

Ryan Bridge: We can't bash the RBNZ

The problem with bashing the RBNZ in real time is that nobody really knows how badly they might have cocked something until well after the cocking's happened.

There weren't many, though not none, chiding Orr for low rates until it was bleedingly obvious in actual data, and what Prince Harry would term 'lived experience', that prices were on the march.

Kerre Woodham: Was holding the OCR the right decision?

So what would you rather? A little bit of pain now or a whole lot more later? The Reserve Bank yesterday opted to keep the official cash rate at 2.25%, but the decision to hold was a close-run thing. And we know that now because of the transparency around the decisions being made and a jolly good thing it is too. Governor Dr. Anna Breman had to use her casting vote. The Monetary Policy Committee was evenly split on whether to raise the rate. The three Reserve Bank officials wanted to hold, the external committee members wanted to hike and therefore Governor Breman had to use her casting vote.

Roger Partridge: Why boundaries matter in government

The Reserve Bank keeps inflation in check, oversees the financial system, regulates banks and issues the country’s currency. These are important jobs, defined by Parliament. Nowhere among them does it say: decide where banks must put their ATMs.

But that is what the Bank is now attempting. It wants banks to establish more than 1,200 cash service sites across the country, at an estimated annual cost of $104 million. An 84-page consultation document details coverage maps and cost projections. What it conspicuously lacks is a legal basis for any of it.

Damien Grant: Is this moment that the PM forces me to eat my words? I hope so

While our collective focus is on the impending economic collapse driven by a lack of petroleum, my attention has been diverted by a speech given by a relatively obscure, but important, government apparatchik. The Reserve Bank chief economist Paul Conway.

The problem with government economists is their language is constrained by the necessities of convention. They would describe an invasion of Orcs pouring over the balustrades howling with bloodlust as an incoming negative external shock with the potential for adverse economic outcomes in the short to medium term.

Mike's Minute: Here's the problem with the Reserve Bank economists

The problem with people like Paul Conway, who is the Chief Economist at the Reserve Bank, is they “know” some stuff.

They sound good in a speech, but their record exposes them badly.

Paul gave a speech this week to the National Financial Advisers conference.

Dr Eric Crampton, Roger Partridge: Reserve Bank drifts out of its lane again

A principal who runs a school well does not get to tell parents what to cook for dinner. The authority is real – but it is specific. It does not travel home with the children.

The Reserve Bank of New Zealand seems to have the same problem – mistaking authority in one domain for authority in everything adjacent.

Ryan Bridge: House prices no longer lead economic growth

So the OCR decision was largely as expected yesterday, but what the Reserve Bank made very clear is where they think growth will come from.

As we’ve spoken about on the show lately, house prices aren’t running away here like in Australia, bar Queenstown.

Ryan Bridge: Beware the insatiable beast that is the state

It's like a hungry child screaming for more food, even though you've just fed them dinner and pudding.

Across the Tasman, Jim Chalmers, the Aussie Treasurer is facing high debt and deficit. They've managed to achieve the highest level of spending to GDP of any government in 40 years outside the pandemic. Sound familiar?

Dr Bryce Wilkinson: Why central banks commonly ease up on inflation too soon

Consumer price inflation in New Zealand is not beaten. The Reserve Bank might decide it has cut interest rates a bit too much.

It has cut the official cash rate nine times in just 16 months.

We will know the decision on 18 February. This is its next scheduled review date.

David Farrar: Reserve Bank sees sense

The Reserve Bank announced:

“Following the completion of the review commissioned by the Board in March, we are pleased to announce modernised capital rules that will support an efficient and resilient financial system,” said Rodger Finlay, Chair of the RBNZ Board.

Mike's Minute: Still more questions to answer for the Reserve Bank

The mail I'm getting got a bit more official yesterday with Fitch suggesting they think the Reserve Bank isn't done.

A lot of people thought the Reserve Bank was done cutting because fill-in Governor Christian Hawkesby basically said as much last week.

Perspective with Heather du Plessis-Allan: Is there a positive side to this recession?

Can I give you a positive spin on the recession that we're just coming out of?

I mean, maybe it's not so much a positive spin, but maybe it's an explanation for why this recession was harder than it needed to be - but why it actually did need to be this hard.

Ryan Bridge: What we got from the RBNZ yesterday

So what do we know today that we didn't know yesterday after the big show from the Reserve Bank?

Well not much, really.

Mike's Minute: Are banks behaving badly or not?

Regular listeners will be aware of my ongoing angst over banks and whether or not they are legit players in our marketplace.

The Reserve Bank this week, in one final stab this year, will most likely cut the cash rate, again, which will leave it at 2.25%.

The Co-operative Bank last week claimed they are the only ones who have fully passed on the cash rate cuts so far.

Richard Prebble: A Year Is an Eternity in Politics — Luxon Knows It, Trump Fears It

If a week is a long time in politics, a year is an eternity. Both Prime Minister Luxon and President Trump must hope so — though for one of them, time may already have run out.

In New Zealand, the National-led coalition is somehow trailing Labour in the polls on economic management. Labour took office with a wonderful set of books, inflation under control, and the economy growing. They left behind deficits, debt, inflation, and a recession. Yet today Labour leads on the very issue they mismanaged. If the coalition cannot reverse that number, it signals defeat.

Mike's Minute: Bank margins are going up despite major profits

The battle of the bank BS is back.

BNZ, who announced their profit last week, talked of the strong competition out there.

But I note their margin went up, up, 6 points to 2.43%.