Written By: - Date published: 7:23 am, December 7th, 2018 - 11 comments
Categories: business, capitalism, david parker, Deep stuff, Economy, employment, grant robertson, labour, monetary policy, Politics, treasury - Tags:
Way, way back in the day, there was a Prime Minister called Robert Muldoon who made himself the Minister of Finance. As a total control freak he was the epitome of a leader dominating a command-and-control economy and society. He had a lot of pretty direct control over the Reserve Bank as well.
But his spectre of 35 years ago remains an excuse for never letting politicians near the actual inflation/economy balancing machine called the RBNZ.
That kind of Prime Minister really pushed the boundaries of our constitutional framework, and it was pretty clear to the incoming Lange-led government that some real statutory independence was in order.
So since 1989, 30 years ago, the Reserve Bank has had a lot more separation from direct democratic control. It has its own Board, and the government of the day sets its objectives, which are intended to be as enduring as possible.
The current policy targets agreement provided by this government’s economic objectives for the New Zealand requires the Reserve Bank to “improve the wellbeing and living standards of New Zealanders through a sustainable, productive, and inclusive economy. Our priority is to move towards a low carbon economy, with a strong diversified export base, that delivers decent jobs with higher wages and reduces inequality and poverty.”
Specifically for the part that monetary policy is expected to play, the Government “expects monetary policy to be directed at achieving and maintaining stability in the general level of prices over the medium term and supporting maximum stable employment.”
With stuff-all inflation, and stuff-all headline unemployment, you’d have to say they are meeting their core objectives easily, which shows that their targets are too easy for any useful accountability to anyone.
But after 30 years, another reforming Labour-led government decided it was time to give this Act a shave and a haircut. More specifically, Labour campaigned on a policy to update the Reserve Bank Act, to widen the objectives of the Bank to ensure that monetary policy decision-makers emphasised both those factors, rather than just driving inflation down as the previous government did.
Personally I don’t think it would have killed them to have the Minister of Finance sitting on the Reserve Bank Board as of right. That would not have upset the consensus-based approach to their decisions. Ah but no.
And since our banking system is 90% dominated by foreign banks most of whom are Australian-domiciled, I wanted to see much stronger powers to regulate them. Earlier this year the IMF carried out a comprehensive review of New Zealand’s financial system against international standards, with a focus on the quality of financial sector regulation.
It’s not too long ago that our entire mezzanine finance sector died and killed off a generation of retirements savings with it. It’s even shorter ago that the entire Australian Big Four banks were found by a Royal Commission in Australia to be an usurous, greedy, nasty bunch of pricks. So yes, the IMF were right.
But apparently our branch offices were fine and would never do such a thing. Like butter wouldn’t melt.
We have no reason to trust banks. They own us. The Australian banking system owns us. Why we would not align the regulatory powers of our own Reserve Bank with those of Australia beggars belief. And this is despite the Reserve Bank reacting to the IMF study that according to our previous Governor:
The Reserve Bank recognises that, despite a rebalancing towards more regulation post-GFC, New Zealand’s banking system remains unusual given the emphasis that is placed on self and market discipline, and its relatively low-intensity supervisory approach.”
It is bizarre that our Reserve Bank Governor should think – particularly after the recent Panama Papers revelations – that the most useful thing is to design a system of banking regulation that fits New Zealand conditions. What it needs to do is protect us from the shits that run the money in this world. To do that is needs big, sharp regulatory teeth. And it doesn’t want them.
Instead of a wee tad of direct democratic oversight coming into the picture, the RBNZ will have a committee-based decision-making model that includes Treasury officials. Now, don’t slag Treasury off quickly. They are well on the way to implementing Minister Robertson’s new wellbeing framework for budget bids and for Budget 2019.
But what we have instead is the most anodyne of reforms to the Reserve Bank, simply a set of tweaks to ensure that it is able to emphasise employment targets as well as inflationary ones. But to otherwise dust your hands of another campaign promise.
Here’s the bill text, intended to be passed early next year.
Banking, according to Deputy Prime Minister Winston Peters only yesterday, is one of several industries in New Zealand that is fleecing New Zealanders.
So at least there’s one government politician who gets this. It’s not as if we need another GFC to remind us of what a “self-regulating” banking sector does to a society when its’ profits are threatened. It sucks us dry.
Banking is but one of a series of oligopolies exercising cartel-like behaviour over this country that are sucking us to a husk. These near-cartels include:
… and other goods and services with barely any price regulation that we totally rely on for our very lives as well as a functioning society.
That list above contains a multitude of regulatory nightmares, affecting millions of New Zealanders, and this government will face a couple of terms just getting to grips with any of them.
And if this government doesn’t understand after the debacle it is facing in NZTA of “self-regulation” in the car and truck industry, it is only a matter of time before we get yet another avoidable disaster in any of them, including banking.
Regrettably this government has near-zero regulatory experience in its cabinet, and the person with any is David Parker and he is flooded.
In that Wellington situation, for the Reserve Bank, status quo has largely prevailed.