Robert MacCulloch
Robert MacCulloch is a native of New Zealand and worked at the Reserve Bank of NZ before he travelled to the UK to complete a PhD in Economics at Oxford University.
In the introduction to its November Monetary Policy Statement, the Reserve Bank states, “Economic activity in NZ remains subdued” and then just a few lines later on, “Global economic growth is expected to remain subdued.” The same words, remain subdued, are used to describe both how NZ is doing and the rest of the world. It’s for a reason.
The RBNZ is saying “Don’t blame us for engineering three recessions – everyone is doing it hard.” Are they? Read the introduction to the International Monetary Fund’s Global Economic Outlook published last month. It says:
... despite a sharp and synchronized tightening of monetary policy around the world, the global economy has remained unusually resilient throughout the disinflationary process, avoiding a global recession. Growth is projected to hold steady at 3.2 percent in 2024 & 2025, even though a few countries, especially low-income developing ones, have seen sizable downside growth revisions, often as a result of increased conflicts.”
Is the RBNZ living in a parallel universe?
The two statements are opposites. Amazingly, incredibly, the IMF says just a few “low-income” nations have revised growth down, mainly because of wars, making NZ one of a tiny group of non-low income nations, without a war, that is languishing in recession after recession. The IMF ranks us 181 out of 190 nations in terms of GDP growth. Meanwhile, our Central Bank gives a completely – absolutely – totally different impression of the truth. What astounds me most about the RBNZ’s Monetary Policy Statement is that it say: “Slower growth in government spending, falling net immigration and subdued global growth are also dampening demand” in NZ.
But the numbers hiding in Table 7.4 of the policy statement’s appendix tell a different story. They include components of GDP for 2024 (private and government consumption, investment and net exports). Of those, investment is down -2.1 per cent, causing NZ Gross National Expenditure to fall by -1.5 per cent. However exports are up a whopping 8.4 per cent – the biggest rise over the 10-year time span of the statement. They’ve prevented NZ from being mired in an even deeper recession.
So the RBNZ line that ‘subdued global growth’ is hurting demand in NZ is crock. The global economy is growing at 3.2 per cent and our exports are way up due to higher overseas demand. What’s more, whether or not our government is “dampening demand”, as the bank says it is, depends on the size of the deficit (spending - taxes). Table 7.5 reports it is -2.5 per cent of GDP in 2024, falling to -2.8 per cent next year. That’s more expansionary than 2023, and indeed any year since 2017 – that is, these past six years – with the exception of 2020 when the pandemic broke out. Government spending maybe rising more slowly – but the coalition trimmed taxes – and so it has not “dampened demand”. It has increased it.
The Monetary Policy Statement’s lines that the NZ economy is weak because the global economy has hurt our exports and our government is choking demand are calculated to mislead. They’re designed to shift blame for NZ’s atrocious performance from the Reserve Bank’s staff onto others to save their careers and reputations. The bank blew up the previous Labour government by ‘engineering a recession’ and now’s blowing up the coalition by blaming the finance minister for weak demand when the facts speak otherwise.
The Reserve Bank is now an institution built on bull. Board chair Neil Quigley’s term was extended by Finance Minister Willis and Bob Buckle has just had his Monetary Policy Committee membership extended. Both presided over the bank’s ‘engineered’ recessions and money-printing programme that fuelled inflation.
When will this NZ ‘never step down no matter how big the cock up’ culture and inbred Wellington appointments club end? Before the last election, Labour Leader Hipkins told Mike Hosking’s radio show that NZ was the world’s second fastest growing economy. Isn’t it time to end the spin, PR, comms and marketing games put into our politics by Jacinda Ardern, who tried governing us on that basis alone? Can’t the Reserve Bank stop putting itself up and the nation (and world) down with its distorted drivel – so NZ can unite, fix its problems, move on and start booming?
Sources:
https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024
This article was originally published by Down to Earth Kiwi.
