ROB MacCULLOCH: Did the Reserve Bank massage its OCR forecasts to help Labour keep power? (we've found evidence pointing to it)
- Administrator
- May 27, 2024
- 2 min read
Last year, in the lead up to the national election, Governor Orr said in May 2023 that he was "very confident" there would not be further interest rate hikes, stating the Reserve Bank had done enough in terms of rate rises. He was interviewed by Mike Hosking on Newstalk ZB on the subject of his rampant confidence in the economy - as this was a highly sensitive matter in Election Year. Hosking also spoke at the same time to former RBNZ Governor, Don Brash, who expressed severe doubts, saying, “[But] the governor indicated it [the OCR] would not be going higher, and that was a surprise both for the market and me personally.”
The RBNZ held onto its "the-OCR-has-peaked" line in its Monetary Policy Statement (MPS) in August 2023, just over one month before the General Election that was held in October. That Statement enabled Finance Minister, Grant Robertson, to issue a Beehive Press Release in September, weeks before the election, saying, "The Reserve Bank is indicating interest rates have peaked .. ". The claim was absolutely vital for PM Hipkins & Robertson's hopes of clinging onto power. It enabled them to argue to millions of Kiwis that the interest rates on their mortgages would fall, persuading them to vote Labour. Enough to swing an election.
Except a short time later, barely four weeks after the October 2023 election was held, which the Nats won, the Reserve Bank dramatically reversed itself. Five days after the signing of the Coalition Agreement on 24 November 2023, the Bank released a new Monetary Policy Statement on 29 November. Instead of forecasting a falling OCR, it forecast a rising OCR. The graph below, obtained from the RBNZ's own data, reveals an OCR projected to rise nearly 25 basis points (from around 5.5% to 5.7%) over the coming year, leading to more potential mortgage rate rises. Had that graph been known about just weeks earlier, then the election result probably would have resulted in a far larger majority for National, since it is lower income earners who would have been most scared by the prospect of higher rates.
If it looks like a partisan RBNZ that favored Labour-Greens, walks like a partisan RBNZ that favored Labour-Greens, and quacks like a partisan RBNZ that favored Labour-Greens, then it probably is a partisan RBNZ favoring Labour-Greens.
Sources:
Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. Rob blogs at Down To Earth Kiwi
More a disappointment than anything else. I held the belief that New Zealand was one of the few nations that had successfully embraced decency and hope based on equality of citizenship. I realise that decency and hope are subjective but I think you know what I’m getting at. The last 4 years however have seen our nation descent into a winner takes all tribal despotic elitist society. We the people are being herded into those favoured, and those that are not.. all in the name of Power.
THE HAPS
It is now less than two weeks until ACT’s 2024 rally Change Makers. Our special guest this year is Paul Henry, a perfect storm of infectious wit, deep thought, and concern for our country. Paul’s another reason to get your tickets for Change Makers on June 9 in Auckland. We hope to see you there.
BUDGET WEEK
New Zealand’s firms, farms and families have (barely) survived six Grant Robertson Budgets, before Grant disappeared in a cloud of debt. He is gone but not forgotten by his old partner in crime Adrian Orr, who reminded us all last week that Grant’s inflation ain’t dead yet and the beatings will continue until morale improves.
On Thursday the Coalition Government’s first Budget…
MacCulloch buys into the giant con that somehow interest rate hikes are an effective monetary tool to control inflation - THEY ARE NOT!
BTW - I totally endorse Charlie, The Jones Boy, Greg, Ray and Zeke's excellent comments and observations earlier in this thread. Interest rate hikes directly feed inflation for 12-18 months, and meanwhile, eviscerate the productive economy, all the while massively rewarding the parasitic financial economy. Yes, eventually inflation does appear to ease INSPITE OF THE RATE HIKES - this is an illusion caused by the debilitating effect these increased costs have imposed on the productive economy. This is one of the most basic concepts out there. Interest rate hikes are equally as inflationary as increases in fuel costs -…
An aside: Over- generous financial arrangements for MPs current or
former. https://www.kiwiblog.co.nz/2024/05/12000_of_expenses_in_three_days.html
O what a surprise !
The odious Orr would do anything to assist his close mate Robertson to retain power and continue with the destruction of our country’s financial wellbeing.
After all Robertson renewed Orr’s contract by an additional 5 years before the due date to protect him from the dole queue which the coalition government would have consigned him to.