Mike Hosking: We need to keep an eye on the handling of the economy

Author
Mike Hosking,
Publish Date
Wed, 17 Nov 2021, 9:26AM
(Photo / File)
(Photo / File)

Mike Hosking: We need to keep an eye on the handling of the economy

Author
Mike Hosking,
Publish Date
Wed, 17 Nov 2021, 9:26AM

There is a theme building, if you follow such matters. 

Steven Joyce carried it on in Saturday's Herald, Tony Alexander wrote about it last week for OneRoof, and Eric Crampton of the New Zealand Initiative had a crack as well. 

It's all about our Reserve Bank and its lack of independence. 

Trouble with the subject is, it’s a bit dry. I doubt it's sweeping the suburbs currently and competing with lockdown, Christmas and summer holiday plans. But the truth is, like many of these dry sorts of matters, it affects every single one of us in a fairly profound way. 

There are some very serious questions to be asked about how the Reserve Bank has handled this country's economy in the past two years of Covid-19. There are legitimate questions to be asked about whether it's Adrian Orr driving it, whether it's Grant Robertson interfering in Orr's mandate, or a mixture of the two. 

There are equally serious questions around why it is we are one of only a handful of countries in the world with rising interest rates. And not just rising interest rates, rapidly rising rates. 

If forecasts are correct, the last rise for the year is coming this month. Some suggest it will be 50 points, and there are another four or five coming next year. 

The question is, why? Inflation is part of the answer. Everyone has inflation, but why is ours at such a point that such a dramatic response is required? Or is it required? Did the Government's obsession with housing and their insistence the Reserve Bank get more and more involved have anything to do with it? Was the Reserve Bank's move to hand out free money to retail banks, knowing it would be on lent to house buyers, play a more significant part than they are prepared to let on? 

Is the fact we have no immigration mean the labour market is crippled, therefore stuff doesn’t, and can't get done? Is government policy of handing out free money, they never had anyway to beneficiaries and through Working for Families, for no productive return, in part to blame? Have we fired up the economy with so much false money we are now facing a runaway inflationary train? 

Reserve Banks are supposed to be slow and steady. Have a look at them around the world.  

Look at ours, it acts like it's on uppers. Why? 

The danger is that, in part, they are getting away with this because most people don’t get it, or don’t care. But when it goes wrong, when your mortgage rate is through the roof, and the economy stalls because everyone finally wakes up and freaks out, it's too late to say, what the hell happened there?