The Reserve Bank’s monetary policy has been an important driver in the last five years behind above-trend growth in the economy and employment, Reserve Bank Governor Graeme Wheeler said today in a speech.

Speaking to the Northern Club in Auckland, Mr Wheeler said that the New Zealand economy has generally performed well in the last five years.

“It’s been a remarkable five years, especially with the challenges thrown up by the global economy and an over-heated domestic housing market. On the international front we’ve seen increasing use of unconventional monetary policies, sluggish international trade, sharp swings in commodity prices, a continued rapid build-up in global debt, and unexpected political developments in Europe, the UK and the US.

“Back home we’ve experienced the strongest migration surge since the 1800s, probably the longest period of negative tradables inflation since the Great Depression, a 75 percent decline in dairy prices before recovering, a major shift in resources to the non-tradables sector to support the Canterbury rebuild, and annual national house price inflation reached 21 percent.”

Despite these challenges, Mr Wheeler said, GDP growth has averaged 2.8 percent and employment growth 2.5 percent. Both exceed the trend rate of growth for the period of flexible inflation targeting up until 2012. Headline CPI inflation averaged 1 percent due to 4½ years of negative tradables inflation, while core inflation averaged 1.4 percent.

“Over the past five years, the Bank’s monetary policy has been an important driver behind the rate of output and employment growth, and the path of non-tradable inflation and inflation expectations. Long-term inflation expectations remain well anchored at the target mid-point of 2 percent.”

Mr Wheeler said that New Zealand has also had a stable financial system. “LVR restrictions have reduced financial stability risks as house prices became increasingly stretched. Requiring new borrowers to have a greater equity contribution in their house purchases reduced the overall riskiness of banks’ mortgage portfolios.

“Nationwide annual house price inflation has declined to 1 percent due to LVR restrictions, the tightening in bank lending, the rise in mortgage rates and increasing concerns about housing affordability.

“LVRs are not expected to be a permanent measure, but their removal would require a degree of confidence that financial stability risks won’t deteriorate again. However, debt-to-income ratios have risen in recent years, and with the underlying drivers of housing demand (population growth, low interest rates) remaining strong and demand outstripping supply, there’s a risk of a housing market resurgence (and a sharp lift in high LVR lending) if LVRs were removed at this time.”

Mr Wheeler said that, in the absence of major unanticipated shocks, prospects look promising for continued robust economic growth in New Zealand over the next two years.

“The greatest risk we face at this stage relates to the inflated global asset prices and the continuing build up in global debt.

“If growth in the global economy slows, we have some scope to buffer our economy. We’ve greater room for monetary policy manoeuvre than central banks in many advanced economies. Our official cash rate is 1.75 percent – above the zero and negative interest rates of several advanced country central banks – and the Bank has not grossed up its balance sheet by buying domestic assets. With a budget surplus and low net debt relative to GDP, there’s also flexibility on the fiscal policy side.”

Read the speech: Reflections on the stewardship of the Reserve Bank

| A RBNZ release  ||  August 30,  2017   |||

The Reserve Bank has appointed Sean Mills as Assistant Governor and Head of Operations. Mr Mills will take up his appointment on 29 November 2017. He is currently Chief Information Officer at the Department of Corrections.

As Assistant Governor and Head of Operations, Mr Mills will replace Deputy Governor Geoff Bascand, who will take up the Head of Financial Stability role on 27 September, when Grant Spencer becomes Acting Governor for six months.

“Mr Mills is an experienced senior leader and business governance chair, has worked on a number of cross-government strategic initiatives, and has over 15 years’ prior experience in the finance sector,” Governor Graeme Wheeler said.

Mr Mills has previously been Head of IT Service Delivery at the Ministry of Social Development, where he contributed extensively to the operating performance of MSD’s technical services. From 1996 – 2006, he held several IT senior management roles at the ANZ Bank.

Departments that will report to Mr Mills are Communications, Currency Property and Security, Financial Services, Human Resources, Knowledge Services, and Risk Assessment and Assurance.

| A RBNZ release  ||  August 29,  2017   |||

The NZ election campaign coincides with a crunch time for the future of the Trans Pacific Partnership. In the absence of the US, attempts to renegotiate an 11-member TPP risk scuppering a deal that could bring enormous benefits to New Zealand, argues Stephen Jacobi, executive director of the NZ International Business Forum.

Good ideas never die and so it has proved with TPP. No amount of huffing and puffing from the arch-protectionists and the anti-globalists, not even the president of the United States, has (yet) been able to consign TPP to history. Those people with genuinely held concerns about aspects of the agreement – and there are many – might wonder why this is so. It’s because the remaining 11 parties to the agreement continue to see it as a means of accelerating trade and investment growth and providing a new benchmark for improving the rules against which business is done in the region. The parties are convinced that the agreement, as negotiated, contains the necessary safeguards to protect domestic sovereignty and the continuing rights of governments to regulate in the national interest.

Officials are meeting again in Sydney this week to try to hammer out a recommendation for TPP leaders to consider when they gather for the APEC Economic Summit in Danang, Viet Nam in November. Officials have met on two earlier occasions since the United States withdrew from the agreement. Reports suggest the coalition is holding at least for the meantime. At issue now is the extent to which the agreement, signed in Auckland in February 2016, and ratified by both Japan and New Zealand, should be amended other than simply the clause by which it enters into force. The latter clearly needs to be changed, but is that all?

Continue to read the full article here | An opinion piesce by Stephen Jacobi for The Spinoff  ||  August 29,  2017   |||

Revivalist opportunity perceived at last moment

An outbreak of middle class idealism based on party immigration policy promises to boost the Green vote at the expense of Labour, and to a rather lesser extent, National, and even New Zealand First.

A sign of this is the 11th hour awakening is decision of the Greens to field a candidate in Ohariu in which the Labour candidate Greg O’Connor had seemed a shoo-in following the resignation of the enduring independent incumbent Peter Dunne MP.

Mr O’Connor (pictured) is one of the very candidates anywhere in the entire Westminster sphere who meets the traditional Labour Party guidelines. A tough street-level cop, deployed into the most troublesome zones, he went on to run the police union for an entire generation.

The Greens understand that Labour will respond with their own counter truce-breaking reprisal of some kind before the general election.

But the electorate move in Wellington’s up-scale suburb of Karori with its horse-riding schools and country club environs by the Greens is one of the party’s several calculated risks in the last few months and a closer examination of this one indicates a strategic positioning which also contains a strong surprise value.

The Green Party is the only party to have an ironclad policy embracing the acceptance in New Zealand of refugees, the ones from nations torn by tribalism and sectarianism.

All the other parties have hedged around the refugee issue, seeking to bury it in their wider immigration policies covering desired skills and economic contributions.

Facebook commentaries whizzing around between greying baby boomer ex- activists also indicate that Labour’s new leader Jacinda Ardern MP is expected to conjure up a reprise, if only partial, of the Labour glory days of the Vietnam-Apartheid-Nuclear era.

Great revivalist expectations such as this were simply not even to be considered under former leader, the pragmatic Andrew Little whose non telegenic façade shrouded a subtle blend in fact of the Trades Hall-varsity nexus and union lawyer.

Winston Peters MP and his New Zealand First Party will remain substantially, but not entirely, inoculated against any late-developing fever centred on the asylum-seeking category of immigrant.

This is just because New Zealand First’s most visible policy plank is the thumbs down to most immigrant categories regardless of whether they come bearing gifts or sectarian blood feuds.

The prospect of the Greens unveiling a high profile moral compass pointing to refugees in the accepted meaning of the word, and thus igniting a last minute bush-fire type of guilt-propelled fervour, is a prospect that Labour appears to be anticipating now.

We look now at the election eve multi-faceted immigration issue in its wider sense ……………………………….

THE GREEN PARTY

Advantage of humanitarian position on refugeesThe children of the baby boomers appalled by middle class material values of their parents, who they often regard as sell-outs anyway, , reach for an ideal, in this instance the refugee one, in order to re-establish the nation as a force for good in the world. The Greens offer the only unequivocal policy in regard to accepting refugees, especially the ones that other nations do not want.

Argument against The children of the baby boomer beset by the need now for dual incomes and the financial demands of the tertiary education required by their own offspring are suspicious of the financial and social impact of the moral crusades of the type embarked upon by their parents in their own university days. These were free of charge and the parental generation in addition was often actually paid to enrol and attend university, incredible as it may seem now.

THE LABOUR PARTY

Advantage in stressing a new and enhanced humanitarian position on refugees

A breath of fresh air into the Helen Clark era doctrine of multiculturalism and diversity offering New Zealand an opportunity to walk tall once more in all the right international convocations, notably United Nations

Argument againstA disquieting medium-term memory of the way in which Auckland schools, houses, and hospitals began to creak at the seams during, and after, the immigration influx inaugurated during this same era.

The National Party

Advantage in suddenly opening the policy gates to refugeesAn indirect reminder that gung-ho immigration policy inherited from Labour ensured that businesses kept at full throttle and that the nation’s lavish, on a population basis, investment in universities of all description became partially shouldered by foreign students. A German-style open door refugee policy could/would sustain and enhance this

Argument againstImmigration was used to fuel the “rock star” economy at the expense of infrastructure which in this context is code for houses, schools, hospitals. Also that the increasing reliance on the private students from foreign lands and their need to collect a degree of some sort and a widespread belief that this every-punter-gets-a prize devalued these qualifications and provided also the now much-quoted “back door” for an extended if not permanent stay here.

NEW ZEALAND FIRST

Advantage in its turn-off- the-taps immigration policy.Immigrants are drawn to metropolitan centres such as Auckland already populated beyond its carrying capacity. Both National and Labour have implemented this state of affairs, the party claims. Universities have become disguised back doors for the “c’mon in” techniques devised by the immigration “consultants,” and until quite recently evident on their web sites. New Zealand First insists that immigrants must be selected on a needed and high skills basis.

Disadvantages in this policyThe drastic tourniquet is in some conflict with New Zealand First’s new role as the true saviour and champion of farmers and cultivators. They cannot find manpower locally and seek to fill this vacuum with workers from Asia especially. Their work is of the repetitive and conscientious type and does not meet the New Zealand First advanced specialist skill criterion.

Background to the all-party immigration dilemma

A very wide spectrum of voters are keen on immigration – in any form.

Big business for a start because it increases the number of consumers and the number of workers available to meet their needs.

The churches are very enthusiastic. Their inclusive view is both spiritual and practical in that people in need are manna from heaven and very much so in an epoch of dismayingly shrinking conventional congregations.

Social service agencies of all types tend to be similarly enthused

Metropolitan politicians are also enthusiasts as they see their electoral roles filling up with supplicants and thus voters.

Immigration Topics that National and Labour prefer you did not Introduce

So why has immigration replaced employment and even health and education as the most sensitive issue in this general election?These issues are widely considered to be interrelated in that many of the so-called occupied urban jobs are in fact part time only. This is considered to be due to the ample availability of people to fill them because of the swelled urban work-force because of the immigration influx which also stands accused of putting the strain on houses, schools etc.

Why is the refugee component of this issue so ultra-sensitive?It is dangerous to Labour and this has been indicated by the Green’s decision to stand its own candidate in Ohariu, which is regarded as a liberal constituency.

A sudden intensity focus on a need by New Zealand to admit many more refugees seeking asylum by the Greens would prick this liberal conscience and force the Labour Party into a defensive corner in which it has no ambition to be. Not in the run up to the election, anyway.

You could have the Greens asking for example why a nation, one of the self-proclaimed international good guys, and which has less than half of one percent of its land mass urbanised is not taking in many more?

oreign Minister Gerry Brownlee today announced the appointment of career diplomat Jonathan Curr as High Commissioner to Fiji.

“The Fiji – New Zealand relationship has warmed since 2014, with the reciprocal visits of former Prime Minister John Key and Prime Minister Bainimarama in 2016 a significant milestone,” Mr Brownlee says.

“New Zealand’s bilateral engagement with Fiji continues to grow in terms of two way trade, tourism, defence and development.

“New Zealanders travel to Fiji in ever increasing numbers to enjoy the sun and sea, and Fiji is our largest trade relationship in the Pacific.

“We also have close defence links in the Pacific and in international deployments,” Mr Brownlee says.

In 2018 Fiji will be focused on national elections, for which New Zealand is providing technical assistance to the Fiji Electoral Office.

Mr Curr is currently Ambassador to the Republic of Turkey, cross-accredited to the State of Israel, the Hashemite Kingdom of Jordan, Georgia, and the Republic of Azerbaijan.

He has also served at the New Zealand Embassy in Cairo and the New Zealand High Commission in Nuku’alofa.

| A Beehive release  ||  August 25,  2017   |||

Yesterday’s release of Treasury’s Pre-Election Economic and Fiscal Update (PREFU) provides a fairly sobering forecast of our ability to grow wealth in and for New Zealand, say the New Zealand Manufacturers and Exporters Association.

NZMEA Chief Executive, Dieter Adam says, “We have to face the reality of our lack of economic development in New Zealand. And now is the right time to challenge New Zealand’s leading parties to tell us what they are going to do to push our economy towards a more prosperous future for everyone.”

“For the next four years (2018 to 2021) Treasury forecasts a decline in the rate of absolute GDP growth in 2020 and 2021, with a similar decline in the export growth rate, down to just over 2% in 2020 and 2021. By then we’ll be four years away from the current Government’s goal of growing the share of exports to GDP to 40%, and further away from reaching that goal than ever.

“These observations sit alongside our own, and Statistics New Zealand’s data on exports of elaborately transformed goods, which have been in decline for the past 18 months or so.

“Treasury’s forecasts for the increase in GDP, as modest as they may be, are still based largely on a growth of labour inputs due to immigration for 2018. After that, miraculously, labour productivity will take over as the main driver of GDP growth. When it comes to explaining what this expectation is based on, given that for the last three years, for example, we saw virtually no productivity growth in our economy, the report remains silent, but states that “productivity growth may be slower than assumed if labour inputs grow more strongly than expected” - meaning if the forecast drop in immigration numbers doesn’t eventuate.

“So, what have we actually got here? An economy projected to grow at modest rates overall, especially in the second half of the outlook period (2020 to 2021), and growth rates for Real GDP per capita, the real measure of wealth creation, of 1.2% and 1.0% in the same period. And all of that based on a miraculous increase in labour productivity from around zero currently to between 1.5% and 1.8% from 2019 onwards.

“We suggest it is time we have a serious debate on how we can sustainably improve our ability to grow wealth in this country. Growing wealth, so we have more money to pay for a better health system, better education, and other public services. You can’t do that if most of the growth in your economy comes from immigration, or when many people’s perception of increased wealth comes from rising asset prices fuelled by ever-increasing private debt.

“Growth in wealth comes from growing the output per hour worked – and that, as the late Sir Paul Callaghan kept reminding us, will only happen if we achieve growth in those sectors of our economy that produce and export high-value products and services. Our manufacturers, together with other sectors of our productive economy, stand ready to contribute. It’s about time the major political parties did their bit by making this a key focus of their efforts” says Dieter.

| An NZMEA release  ||  August 24,  2017   |||

A slightly softer growth forecast is the main feature of largely unchanged Pre-election Fiscal Update compared to the Budget forecasts three months ago, Finance Minister Steven Joyce says.

“The softer growth New Zealand has experienced in the six months to March flows through to a lower starting point in the 2017/2018 year,” Mr Joyce says.

“The net effect is that growth is slightly lower through the forecast period – averaging 3.0 per cent over the next four years rather than the 3.1 per cent predicted in the Budget.

“The other notable change is that Treasury expects the labour market to be tighter over the next four years, with lower unemployment and stronger nominal and real wage growth.

“Treasury forecasts unemployment to drop to 4.3 per cent by June 2020 and for the average annual wage to increase from $58,900 at March 2017 to $65,700 by 2021, a $1300 per annum improvement on the Budget forecast.”

Other changes to the forecasts include:

• A smaller balance of payments deficit across the forecast horizon
• Lower CPI inflation, especially in the 2017/18 year
• Net government debt falling below 20 per cent of GDP in the 2020/21 year. New Zealand Superannuation Fund contributions remain scheduled to resume in that year.

Most other elements of the forecast remain very similar to budget predictions, with nominal GDP, migration levels and budget surpluses largely unchanged, although the timing of budget surpluses has changed.

“The Budget surplus is expected to be $2.1 billion higher in the year just finished,” Mr Joyce says. “However Treasury expects the lower growth forecast to result in surpluses that are $1.8 billion lower over the next four years. The net effect is about even.

“The Government’s strong fiscal management means that New Zealand is one of the few OECD countries to be posting fiscal surpluses. This hard-won position is underpinning the Government’s strong economic plan which is delivering jobs and steady real wage growth for New Zealanders.”

The large infrastructure spend committed to in Budget 2017 means that residual cash remains broadly in balance until the 2019/20 financial year.

“There is limited room for any additional expenditure beyond what is already proposed in these forecasts until the 2020 financial year when there is expected to be a $1.7 billion cash surplus. Anything significant in the meantime would involve more borrowing or raising additional tax revenues,” Mr Joyce says.

The PREFU forecasts include the following budget spending commitments:

• $7 billion in additional operating expenditure over four years in Budget

2017 which commenced on 1 July 2017.

• $1.7 billion per annum ($6.8 billion over four years) operating

allowance to be allocated for Budget 2018, increasing by 2 per cent

each subsequent budget.

• $32.5 billion in total capital infrastructure investment between 1 July

2018 and 30 June 2021.

• $6.5 billion over four years ($2 billion per annum in out years) for the

Government’s Family Incomes package commencing on 1 April 2018.

“Government annual operating expenditure in these forecasts increases from $77 billion to $90 billion over the next four years, which is sufficient for significant ongoing improvement in the provision of public services,” Mr Joyce says.

| SA Beehive release  ||  August 23, 2017   |||

New regulations for New Zealand’s fuel specifications will support the growth of lower-emission fuels that are better for people, the environment and cars, Energy and Resources Minister Judith Collins announced today.

The Regulations set out minimum standards for fuel performance, and change incrementally over time to keep up with new technology and international best practice.

“There are four significant changes – three that enable greater fuel supply choice and market-led innovation in the fuel mix; and one to reduce harmful emissions:

· Introducing a total oxygen limit, which potentially allows a wider range of fuel blends;

· Increasing New Zealand’s limit for methanol in petrol from one to three per cent volume;

· Raising the biodiesel blend limit in diesel from five to seven per cent; and

· Reducing the sulphur level allowed in petrol from 50 to 10 parts per million.

“The changes carry multiple benefits for consumers and for our environment.

“Three of the changes – the introduction of a total oxygen limit, increasing the biodiesel blend limit, and increasing the methanol blend limit – could potentially allow more flexibility in fuel mixes, a reduction in harmful emissions and increased diversity and enhanced security of local supply.

“The other change of reducing the sulphur level in petrol is specifically targeted to reduce harmful emissions, which will have health and environmental benefits. This is consistent with the most stringent fuel standards in the world, most notably in Europe, Japan and the United States,” says Ms Collins.

All of the amendments will take effect from 2 October 2017, apart from the change to the maximum sulphur level, which will come into effect on 1 July 2018.

More information is available at: http://www.mbie.govt.nz/info-services/sectors-industries/energy/liquid-fuel-market/reviewing-aspects-of-the-engine-fuel-specifications-regulations-2011

| A Beehive release  ||  August 22,  2017   |||

Inflation targeting practises are similar across many central banks despite significant differences in their formal frameworks, says the Reserve Bank in its latest Bulletin article published today.

The Bulletin article titled “An international comparison of inflation targeting frameworks” looks at how New Zealand’s Policy Targets Agreement compares to nine other advanced economy central banks, and how the specifications in each framework compare to the actual practice of each central bank.

“In order to conduct the comparison we focused on five components of an inflation-targeting framework: the inflation target definition, communication of monetary policy, secondary considerations, assessment of inflation-targeting performance, and framework reviews and revisions,” says the article’s author, Senior Economic Analyst Amber Wadsworth.

“Overall we find that the formal inflation-targeting frameworks can differ greatly between the central bank, but, in practice, each bank operates in a similar manner.”

“The central banks we looked at have similar inflation targets and produce similar monetary policy reports and inflation targeting assessments. There is more variability in the financial stability considerations when setting monetary policy, and how the inflation-targeting frameworks are reviewed and revised,” says Wadsworth.

More informationRead the Bulletin – An international comparison of inflation-targeting frameworksListen to the Behind the Bulletin interview

| A RBNZ release  ||  August 16,   2017   |||

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The Government has today outlined new measures to promote a more competitive economy, Commerce and Consumer Affairs Minister Jacqui Dean says.

“Competition is one of the key drivers of economic success which is why the Government is focused on creating a competitive economy which delivers results and choice for New Zealanders,” Ms Dean says.

“The Business Growth Agenda Paper, Promoting Competition, which I am releasing today sets out what actions we’re taking to lift competition for the benefit of New Zealand’s consumers.”

The Government has agreed on three broad areas of focus:

1. Maintaining the effectiveness of New Zealand’s competition laws and institutions.
2. Identifying barriers to competition, and opportunities to promote competition, in specific sectors and across the economy.
3. Actively seeking open trade and investment policies which can mitigate the disadvantages of New Zealand’s small size and distance from major markets.

“New Zealand’s competition law and our Commerce Commission are important contributors to domestic competition, and are well regarded internationally and we are continuing to build on that.

“Other recent measures include passing the Commerce (Cartels and Other Matters) Amendment Bill last week which deters anticompetitive cartel behaviour.

“And following a review of the Commerce Act, the Government is progressing legislation to allow the Commerce Commission to undertake market studies to ensure markets are operating effectively,” Ms Dean says.

Read Promoting Competition here: http://www.mbie.govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/2017-documents/promoting-competition.pdf

| A Beehive release  ||  August 15,  2017   |||