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Mike's Minute: Plenty of questions for Adrian Orr

Author
Mike Hosking,
Publish Date
Thu, 2 Jun 2022, 9:59am

Mike's Minute: Plenty of questions for Adrian Orr

Author
Mike Hosking,
Publish Date
Thu, 2 Jun 2022, 9:59am

What I like about Don Brash entering the cost-of-living debate is he comes with knowledge, experience and he tells a different story to Adrian Orr.

We have two Reserve Bank Governors with different stories, so who is right?

If Brash turns out to be more accurate in the long run, you can quite justifiably ask a couple of solid questions of Orr. Was he up for the job? Why couldn't he see what others did? And in defending his approach which he currently is, how political has he become?

Having him on the show last week was a revelation of sorts. He was painting a picture, which to my eye, simply isn't true or real.

In suggesting government spending is small beer in the inflationary picture he has to contain is absurd. The Government has laden us down with a mountain of spending and a mountain of debt. Brash sees it, Orr doesn’t.

Spending is inflationary, especially when it hasn’t come with any boost in productivity or bottom-line growth, which of course a lot of government spending doesn’t.

Orr sees inflation having peaked and this is as bad as it gets. I don't know many who would agree. He's peaking the cash rate out at 3.9 percent, that’s worse that previously forecast.  

This is one of the weaknesses of the Orr argument, so many of their forecasts turn out to be wrong.

Brash sees the rate going higher than 3.9 percent.

You've got to remember what Orr is trying to do is bring inflation under 3 percent, preferably to 2 percent, while at the same time not sending us into a spiral of economic misery, which by the way spending data already shows we have hit. Plus, he's doing it while having no control over aspects of the economy like oil, shipping and China's Covid approach.

And he's cutting inflation at a time of no growth but also as we ask for more and more money because the price of everything is going up and up.

I want Orr to be right, because his theory seems to be the least painful.

But you don’t have to be an economic genius to see making this thing land softly is almost impossible. And when people like Brash, and indeed Steven Joyce if you read him over the weekend, are saying something completely different.

You have to wonder if Orr, having thrown so much printed help at the economy, is now in the tricky position of having to fix his own mess while pretending it's not that big a deal.

Also, presumably not pointing the finger directly at Grant Robertson who, if Brash and Joyce are right, is as donkey deep as the Reserve Bank Governor.