OCR down .25 basis points

June 11, 2015

Reserve Bank Governor Graeme Wheeler has announced a small drop in the Official Cash Rate:

The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 3.25 percent.

Growth in the global economy remains moderate. Data on economic activity in the US, China and Australia has been mixed, although there has been some improvement in the euro area and Japan. Volatility in financial markets has increased.

The New Zealand economy is growing at an annual rate around three percent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices. However, the fall in export commodity prices that began in mid-2014 is proving more pronounced. The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the mid-point would be delayed.

Inflation has been low due to falling import prices and the strong growth in the economy’s supply potential. Wage inflation and inflation expectations have been subdued.

With the fall in commodity prices and the expected weakening in demand, the exchange rate has declined from its recent peak in April, but remains overvalued. A further significant downward adjustment is justified. In light of the forecast deterioration in the current account balance, such an exchange rate adjustment is needed to put New Zealand’s net external position on a more sustainable path.

House prices in Auckland continue to increase rapidly, and increased supply is needed to address this. The proposed LVR measures and the Government’s tax initiatives planned for 1 October 2015 should ease the impact of investor activity.

A reduction in the OCR is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium term inflation converges towards the middle of the target range.

We expect further easing may be appropriate. This will depend on the emerging data.

It’s good to see policies to address the supply side of the Auckland housing problem being acknowledged so that the rest of us aren’t paying in higher interest rates.


Inflation targeting works

December 1, 2014

The Reserve Bank’s focus on inflation is working:

Inflation targeting has delivered price stability without reducing long-term growth, and remains the appropriate focus for monetary policy, Reserve Bank Governor Graeme Wheeler said today. . .

“Price stability has brought many benefits. It enables people to plan and contract with greater certainty for longer periods. It reduces the inflation risk premium in interest rates and the need for speculative inflation hedges, and it reduces the insidious toll that inflation exacts on the more vulnerable and less financially sophisticated,” Mr Wheeler said.

The opposition’s calls for a less rigorous approach to controlling inflation is foolish.

Inflation is theft, it erodes the real value of savings and that hits the poorest hardest.

“In the 20 years before the Act, annual real GDP growth averaged 2.2 percent while annual inflation was volatile around an average of 11.4 percent. Since 1990, real GDP growth and annual inflation have averaged 2.6 and 2.3 percent respectively, and there has been a marked decline in inflation variability.”

Mr Wheeler said the Reserve Bank is a ‘flexible inflation targeter’.

“We seek to anchor inflation expectations close to the price stability objective while retaining discretion to respond to inflation and output shocks in a flexible manner.”

This flexible, medium-term approach to policy was drawn on at the outset of the Global Financial Crisis when the Bank lowered the Official Cash Rate by almost 6 percentage points in 2008-2009, even though headline inflation was initially well above target. This policy stance was able to cushion the impact of the crisis.

In order to do its job effectively, Monetary Policy needs to be supported by prudent fiscal policy and sound structural adjustment policies. Monetary policy can affect the demand for housing and help ease imbalances in the housing market while supply is increased. But it cannot free up more land constrained by zoning regulations, address procedural and pricing issues around planning consents, offset tax policies in the housing sector, or raise productivity in the construction sector. . .

The tax and spend policies proffered by opposition parties before the election would have been inflationary and pushed up interest rates.

Housing prices reflect supply and demand. The best way to address that is to increase the supply where it’s not meeting demand. Local government has a big part of play in doing that by sensible zoning and simple and timely consent processes.

The full speech is here.


Prudence best recipe for sustainability

August 15, 2014

Trans Tasman previews next weeks PREFU:

. . . What the PREFU will highlight are Treasury forecasts on economic growth remaining robust, but “normalising” after the dairy boom last season, and on fiscal surpluses thinner than those set out in the budget.

There’s no windfall in revenue as there was in 2005 when the Govt of the day, caught by surprise, scrambled to splash out big spending programmes like Working for Families. The economic situation NZ finds itself in during this cycle is very different. Then credit growth was running at around 10%, compared with 4% now, inflation was high, and consumption was fuelled by rampant debt. This time round, the Reserve Bank Governor Graeme Wheeler jumped in early, and has got the surge in house prices under control. Inflation is subdued, wage growth is only moderate, productivity is rising, households are keeping their spending in check, and corporate balance sheets are in good shape. 

So the cycle this time will have a flatter, steadier profile, but growth will be at a sustainable pace, lasting longer. The economy is growing another “leg,” with hi-tech exports rising exponentially. For the Govt, the aim is to keep the economy running on a smooth, upward trajectory. Its eyes are on winning not just this election, but in 2017 as well. For this to be achieved, it has to deliver rising standards of living through the whole cycle. It can’t yet risk another boom-bust, of the kind which has dogged NZ over the last half century, if is to capitalise on the reputation it has sought to nurture of being the most prudent economic managers the country has had in the modern era. . .

The improving outlook for the country has been hard-won and is a result of careful management.

The expected outlook for growth at a sustainable pace and lasting longer is encouraging but it’s not assured.

We know what a National-led government has achieved and can be confident they will continue with the same prudent recipe to ensure that growth is sustainable

A prospect of a weak Labour Party leading a coalition propped up by the Green, New Zealand First and Internet Mana Parties gives no cause for confidence.

Policies announced so far are repeating the failed recipe of the past based on the toxic ingredients of  higher taxing, higher spending.


Low spending, lower interest rates

June 12, 2014

Quote of the day:

Reserve Bank Governor Graeme Wheeler can only show restraint on interest rate rises if New Zealanders show restraint of their own.

This is Rob Hoskings’ introduction to a column headlined: Want low interest rates? Keep lid on spending.

We all have a role to play in that through our own spending and saving and also what we expect of government.

National has made it quite clear it won’t be doing an election-year lolly scramble.

The return to surplus hasn’t been easy and it’s not going to blow the hard-won gains by profligacy.

Opposition parties try to give the impression they accept the wisdom of careful management of public funds. But their strong attacks on every single measure National has introduced to curb spending and their propensity for big-spending promises show they don’t really mean it.

They’re wringing their hands over the Reserve Bank’s small increase in interest rates from historic lows and today’s expected rise, while not resiling from the borrow and spend policies of the noughties which pushed interest rates into double figures and led New Zealand into recession before the rest of the world.

New Zealand has recovered well from the recession, but continued good economic health requires more of the prescription of increased savings and investment and restrained spending from all of us.


Dairy future bright but . . .

May 9, 2014

New Zealand’s dairy sector has a bright future, but important challenges need to be managed to ensure it retains its dynamism.

That’s the view of Reserve Bank governor Graeme Wheeler:

Mr Wheeler told the DairyNZ conference in Hamilton that the dairy sector makes a vital contribution to the New Zealand economy.

“Dairy exports make up almost a third of New Zealand’s annual merchandise exports, animal numbers and prices have increased and on and off farm productivity growth has been impressive.” . .

“The Reserve Bank considers that the exchange rate is overvalued and does not believe its current level is sustainable. . .

“If the exchange rate remains strong, it is likely to be reflected in continued low or negative tradables inflation. In such circumstances, the high exchange rate, along with new economic data, will be a factor in our assessment of the extent and speed with which the Official Cash Rate needs to be raised.” . . .

He’s saying that interest rates might not increase as far or as fast as predicted.

Mr Wheeler said that dairy debt almost trebled over the past decade, and currently stands at $32 billion.

“It is concentrated among a small proportion of highly leveraged farms with around half of the dairy debt being held by only 10 percent of dairy farmers”.

Despite the prosperous outlook for the dairy sector, Mr Wheeler warned that even the most dynamic enterprises can lose competitiveness and suffer losses in market share, so there are important challenges to manage.

“On the external front these include the oscillations in global dairy prices, increasing competition from other international suppliers, the risk of slower growth in China, and the need to continue diversifying our export markets, including positioning for the enormous longer term opportunities in the Indian market. On the domestic front, dairy farmers are conscious that high dairy prices can turn around quickly and will need to continue managing their cash flows and borrowings in a prudent manner.”

Another threat is political.

A LabourGreen government would add to costs through the imposition of new taxes, increased compliance and other anti-business, anti-farmer and anti-growth initiatives.


2014 going to be a cracker

December 15, 2013

Brian Gaynor thinks next year will be a cracker for the economy:

There are strong indications that it will be a once-in-a-generation year, as were 1951 and 1974 when the New Zealand economy grew by 15.6 per cent and 7.2 per cent respectively.

Economic growth is unlikely to be quite as strong as 1951 or 1974 but we now have some similar characteristics, particularly a soft commodities boom and a huge increase in the country’s terms of trade index, which made these standout years. . . .

New Zealand’s economic performance has been disappointing since the mid-1970s, particularly compared with Australia. There have been occasional bursts of heightened economic activity, mainly driven by increases in consumer debt caused by rising house prices, but there has been limited investment in the country’s productive sector.

The economy has been characterised by large net migration outflows as New Zealanders have been attracted by high-paying jobs across the Tasman.

But the economic momentum has swung dramatically over the past twelve months and transtasman migration flows could reverse as Australians are attracted by greater job opportunities in New Zealand, particularly in relation to the Christchurch rebuild. . . .

He lists several reasons the outlook is more like the boom years than those of the past 40 years:

Terms of trade: The country’s terms of trade index rose 7.5 per cent, to 1356, in September, the highest level since December 1973. Australia’s terms of trade have fallen 18 per cent this year.

Dairy: GlobalDairyTrade auction prices have appreciated 52 per cent over the past twelve months and dairy exports surged 49.1 per cent in the three months ended October 31 compared with the same three months in the previous year. Recent surveys show that farmers have significant investment intentions, an important feature of New Zealand’s strong economic performance in the 1950s.

China: It is now New Zealand’s largest export market and is expected to continue to grow by more than 7 per cent a year.

Christchurch rebuild: The inner-city rebuild programme should gather momentum when construction begins on the justice and emergency services precinct from March next year, to be followed by the health precinct in the June or September quarter. These projects, which are mainly funded by the Crown and city, should encourage private sector investment in the inner city.

Migration: The country has had strong net migration inflows in recent months and had total net migration of 17,490 for the 12 months ended October.

This figure is expected to increase steadily over the next few months, and Statistics New Zealand figures show more than 90 per cent of new arrivals settle in Auckland.

Housing: The strong migration inflow should continue to boost the housing market and housing construction, particularly in Auckland.

Government finances: The Crown’s financial deficit is falling and the Key Administration may announce tax cuts in May’s budget. However, large expenditures on the Christchurch rebuild may restrict this option.

Confidence: Business, consumer and farming confidence are all at, or near, all-time highs.

Companies: Most domestic companies have strong balance sheets and plenty of capacity to expand and invest. Rod Drury and Xero have lifted the ambitions of New Zealand companies and we now have a large number of young entrepreneurs with aggressive global aspirations.

KiwiSaver: Last but not least is KiwiSaver, which is giving us a pool of private permanent funds that can be partially invested in the domestic productive sector. KiwiSaver ought to have the same positive effect on the domestic economy as Australia’s compulsory superannuation has had on its economy.

In view of these factors the outlook for the New Zealand economy is exciting, the best it has been since the early 1970s.

The present export- and investment-led upturn could be maintained for several years – as long as dairy prices don’t collapse, the Chinese economy doesn’t go into an unexpected downturn and there isn’t an external shock like that of the mid-1970s. . .

Another threat would be a change of government.

Labour left office in 2008 forecasting a decade of deficits. National has turned that around in spite of the global financial crisis and the Christchurch earthquakes.

Policies espoused by Labour and other opposition parties show they have learned nothing from the mistakes which put New Zealand into recession before the rest of the world.

Gaynor isn’t the only one with a  positive view of the economy:

. . . Harbour Asset Management’s managing director Andrew Bascand says this year’s been a banner year for economic growth but next year’s likely to be even better.

“The outlook for 2014 is for better global economic growth – modestly better – and certainly for even stronger New Zealand economic growth,” Mr Bascand says.

“If there’s one key risk, it’s how households and businesses think of the rising interest rates environment, and a second risk is concerns around uncertainty with an election”. . . .

Reserve bank governor Graeme Wheeler has clearly signalled a rise in the official cash rate next year which will push up interest rates.

But given they are at historic lows that isn’t unexpected and it’s better to have slightly higher interest rates than let inflation get out of control.


Interest rates will rise

December 12, 2013

The Reserve Bank has kept  the official cash rate at 2.5% but clearly signalled an increase is likely next year.

Reserve Bank Governor Graeme Wheeler said: “Growth remains moderate but mixed for New Zealand’s main trading partners. Nevertheless, export prices for New Zealand’s main commodities, and especially dairy produce, have continued to increase.

“New Zealand’s GDP is estimated to have grown at over 3 percent in the year to the September quarter and the expansion in the economy has considerable momentum. New Zealand’s terms of trade are at a 40-year high, household spending is rising and construction activity is being lifted by the Canterbury rebuild and the response to the housing shortage in Auckland.

“Continued fiscal consolidation and the high exchange rate will partly offset the strength in domestic demand. The high exchange rate is a particular headwind for the tradables sector and the Bank does not believe it is sustainable in the long run.

“House price inflation is high in Auckland and other regions due to the housing shortage, and demand pressures associated with low interest rates and rising net inward migration. Restrictions on high loan-to-value mortgage lending, introduced in October, should help slow house price inflation. Data to date are limited on the effects of these restrictions. We will continue to monitor outcomes in the housing market closely.

“Annual CPI inflation increased to 1.4 percent in the September quarter and inflation pressures are projected to increase. The extent and timing of such pressures will depend largely on movements in the exchange rate, changes in commodity prices, and the degree to which momentum in the housing market and construction activity spills over into broader cost and price pressures.

“The Bank will increase the OCR as needed in order to keep future average inflation near the 2 percent target midpoint”.

Yesterday’s announcement by Fonterra that it was holding the forecast milk payout and reducing the dividend might have taken a little heat out of the market, but there are other pressures on inflation, not the least of which is house prices.

The bank removed restrictions on low loan to value ratios for the construction of new homes earlier this week after it became aware that this policy would reduce the housing supply which is one of the factors pushing up prices.

Restrictions remain for loans for existing houses and this is sensible.

If people are stretched to get and service a loan at current historically low interest rates even a small increase could over-stretch their budgets.

With only 10% equity in their properties a small change hey could well end up losing that and if forced to sell would not only lose their homes but still owe money.

 


LVRs introduced for good reason

October 3, 2013

Reserve Bank Governor Graeme Wheeler explains why it was necessary to impose lower loan to value ratios on banks:

 Many New Zealanders consider purchasing a house to be a rock solid investment, and assume that house prices will continue to rise steadily, having never seen a bear market or experienced rapid rises in mortgage rates.

Over the past 25 years, however, many wealthy countries have experienced periods of substantial decline in house prices.

Falling house prices erode homeowners’ equity, while mortgage lenders experience losses on their loan portfolios. The resulting stress in the financial system can have long lasting adverse effects on the economy. For borrowers, it can mean years of spending cut-backs to rebuild savings. The greatest impact is on borrowers, often first-home buyers, who recently entered the market with the least equity. In the United States, real net household wealth for the median household fell 39 percent from 2007 to 2010, and a quarter of America’s mortgage holders owed more on their houses than what their houses were worth.

Our concern is that excessive increases in house prices in parts of the country, if unchecked, pose increasing risk for the financial system and the broader economy. High and rising house prices increase the risk and potential impact of a major correction in house prices, and consequential loss to lenders. In a severe downturn, such losses would be expected to significantly reduce banks’ willingness to lend. Similar views about the risks from our overvalued housing market are expressed by the IMF, OECD, and the major international credit rating agencies.

New Zealand’s house prices are expensive, based on international comparisons of house prices relative to rents and to levels of household income. And our household debt levels relative to disposable income – having doubled over the past two decades – are also very high.

Could New Zealand experience a sharp fall in house prices? While not anticipated, our economy is not immune to such risks. The world economy still faces major challenges and, if global growth slows markedly, or if China’s financial system experiences major difficulties, it would quickly feed into the New Zealand economy and housing market.

House prices are rising rapidly in Auckland and Christchurch for two reasons: housing shortages and easy credit. It is critical that issues around land availability, zoning restrictions and high building costs are resolved and that the housing targets in the Auckland Accord are achieved. It is also important that credit expansion is restrained to be more in line with housing supply. Restricting lending to borrowers with low deposits can help reduce the upward pressure on house prices, especially as banks have been competing aggressively for borrowers with low deposits – with this borrowing accounting for 30 percent of new mortgage lending.

Some suggest that loan-to-value restrictions should be applied regionally, especially around Auckland, or that we should exempt buyers of lower-priced houses.  We considered both options.  However, regional restrictions would be hard to administer and would shift housing pressures outside wherever the boundary is drawn.  Exempting low-priced housing would be a recipe for rapid increases in the cost of such housing. Broad exemptions to other groups such as first home buyers would substantially undermine the effectiveness of the restrictions in reducing house price inflation.

While new for New Zealand, such restrictions have been introduced in 25 countries, and are currently being deployed in Canada, Israel, Korea, Norway, Singapore, and Sweden. Most countries adopting such restrictions prohibit high loan-to-value lending. We have opted for a more flexible approach, which still allows banks to do some high loan-to-value lending. Nor should such moves be seen as permanent. Restrictions will be removed when there is a better balance in the housing market and less risk that their removal will reignite high house price inflation.

While the Reserve Bank’s mandate is to promote financial stability, there are clear implications here for housing affordability. Over the next two years interest rates are likely to rise in order to restrain an expected increase in broader inflation pressures. We currently expect that the official cash rate could increase by 2 percent from 2014 to the beginning of 2016. This could result in interest rates on first mortgages of 7-8 percent. If the loan-to-value speed limit is unable to slow house price inflation, larger increases in the official cash rate would be required.

We are keen to see house price inflation moderate significantly and, in doing so, reduce the risks to the financial sector and the broader economy. Speed limits on low deposit lending are designed to help achieve this. Loan-to-value restrictions are expected to give the Reserve Bank more flexibility as to when and how quickly we have to raise interest rates, but the more fundamental solution to reducing pressure in the housing market lies in addressing the issues around housing supply.

We had good equity, well over 50%, in our farm until the ag-sag of the mid 1980s hit.

Stock prices and land values plummeted, North Otago was plagued by drought and to compound our problems inflation and interest rates soared.

At one stage we were paying more than 25% for seasonal finance and our equity had disappeared.

Had the stock firm to which we owed so much had pushed us to sell we’d have been left with nothing but debt.

Fortunately for us there was safety in numbers and few farm sales were forced. We eventually farmed our way out of our problems and the policies the opposition still describe as “failed” dealt to inflation and interest rates.

The experience taught us some very valuable lessons which those criticising the Reserve Bank’s policy, don’t understand.

Labour’s threat to the Reserve Bank’s independence and stated intention to exempt first home buyers from loan restrictions show no concern at all for the stability of banks and the danger of borrowing too much.

Interest rates are very low now. A small increase would add a significant cost to servicing a big mortgage, unforeseen costs, which always arise, would put further pressure on budgets, make paying off capital more difficult and increase the risk of losing most if not all equity if property prices fall.

The bank can’t do anything about land availability, zoning restrictions and high building costs but it can address easy credit and it’s doing so to protect the financial system and broader economy.


Many factors in manufacuring malaise

February 21, 2013

Reserve Bank Governor Graeme Wheeler says the decline in manufacturing is much more than an exchange rate story.

In a speech to the New Zealand Manufacturers and Exporters Association in Auckland, Graeme Wheeler said factors such as globalisation, outsourcing and international supply chains, along with competition of low cost producers and rising global demand for services meant that the relative importance of manufacturing had been declining in all but the poorest countries for the past 40 years. New Zealand was no exception.

Mr Wheeler acknowledged the New Zealand dollar was significantly overvalued in terms of economic fundamentals, and this was a headwind for some in the manufacturing sector. But he said there are no simple solutions available to the Reserve Bank.

“Some of the strength in our real exchange rate is due to global financial imbalances and the weakness of the US dollar in particular.”

Near-zero interest rates and quantitative easing by other central banks have pushed up currencies like the New Zealand dollar, and domestically, New Zealand’s poor savings record is also to blame. . .

There’s little we can do about globalisation, outsourcing and international supply chains, competition from low cost producers and rising global demand for services.

But improving our savings record is entirely in our own hands.

That probably won’t have much impact on manufacturing because it won’t counter all the other factors which are making it difficult, but it would be much better for us as individuals and for the economy.


Dairy prices up, dollar down

February 20, 2013

The trade weighted index increased by 3.1% in this morning’s GlobalDairyTrade auction.

GDT Trade Weighted Index Changes

GDT Trade Weighted Index Changes

gdtfeb20

The price of anhydrous milk fat rose by 4%; buttermilk powder was up 4.1%; cheddar increased 1.8%; milk protein concentrate was down .2%; rennet casein was down .8%; skim milk powder was up 1% and the price of whole milk powder increased by 5.8%.

The price of whole milk powder has the most influence on the payout.

Usually when the milk price increases the dollar goes up too but today it has gone down a little after Reserve Bank Governor Graeme Wheeler talked about intervening in the currency market.

 


The H word

October 27, 2012

Speaker Lockwood Smith has undone decades of tradition by allowing the h word to be used in parliament.

This is good timing as it coincides with the outing of hypocrisy from the Green Party.

Just a few years ago Green co-leader Metiria Turei was denouncing US democracy being bought and sold.

This week the party explained away using child poverty to attract donations for itself as adopting fundraising techniques used by the likes of United States President Barack Obama .

The h word might also apply to a campaign against any sort of poverty from a party which opposes many of the developments which could foster economic growth.

The Green Party is usually very good at getting publicity but most of that publicity in the last couple of weeks hasn’t been good.

The Lobbying Transparency Bill promoted by Holly Walker has been roundly criticised by numerous submitters including Clerk of the House, the Law Commission, Human Rights Commission, Newspaper Publishers Association, Tainui, Ngai Tahu, Association of Universities, Association of NGOs, and the Auditor General.

The party’s promotion of quantitative easing has been widely panned and got more criticism yesterday when new reserve bank Governor Graeme Wheeler said there was little evidence it had lifted growth overseas.

“New Zealand does not require quantitative easing: the economy is growing at an annual rate of about 2 per cent, and the Reserve Bank has scope to lower interest rates if needed.”

The Green Party recently suggested the Reserve Bank print money to bring down the value of the dollar to help hard-pressed exporters.

But Wheeler effectively slammed the idea, pointing out that since the start of the global financial crisis, the United States Federal Reserve had expanded its balance sheet by 13 per cent of GDP, the European Central Bank by 16 per cent, Bank of Japan by 10 per cent and the Bank of England by about 20 per cent.

“In all four cases the official cash rate is 0.75 per cent or less. In all four cases there is little evidence of any appreciable impact on economic growth,” he said. . .

He said the answer to the high dollar is not printing more money but an increase in savings and investment and a decrease in foreign borrowing.

Apropos of the h word, the most memorable line on quantitative easing was in Seven Days last week when one of the panel pointed out the hypocrisy of the promotion of printing more money coming from the party which also wants to save the trees.


Wheeler new Reserve Bank governor

June 26, 2012

Finance Minister Bill English has announced he intends to appoint Graeme Wheeler as successor to Allan Bollard as governor of the Reserve Bank:

Mr Wheeler will be governor-designate until a new policy targets agreement is finalised in the next few months. This is  required before a new governor is appointed.

“Mr Wheeler’s  extensive experience makes him a highly respected figure in world  financial markets and within New Zealand,” Mr English says. “We were  fortunate to have someone of his calibre available for this important  role.”

From 1997 to 2010, Mr Wheeler was employed by the World  Bank. His most recent roles there included managing director operations  (2006-2010), and vice-president and treasurer (2001-2006). Previously,  he was at the New Zealand Treasury as deputy secretary and treasurer of  the Debt Management Office.

Mr Wheeler, a New Zealander, currently lives in the United States and runs his own advisory business.

As required under the Reserve Bank Act 1989, the Reserve Bank board of  directors recommended Mr Wheeler’s appointment to Mr English, after an  extensive recruitment process domestically and internationally.

“Given his experience and standing, combined with his technical and leadership qualities, the board considered that he has all the qualities required  to become governor and chief executive of the Reserve Bank,” Mr English  says.

He does not envisage any major changes to the policy targets agreement.

“I consider that the current PTA has served New Zealand well and there are benefits in maintaining consistency in the PTA.

“However, the global financial crisis has focused some attention on monetary  policy frameworks, and I want to ensure that the PTA continues to  reflect best international practice.”

Mr English also paid tribute to Dr Bollard for his leadership at the Reserve Bank over the past 10 years.

“He helped steer the New Zealand financial system through the biggest  global crisis in several generations. At the same time, he ensured that  this country continued to enjoy one of the most stable inflation  environments in the world.”

People with short memories might not understand how damaging high inflation is.

Those of  us who struggled to keep our businesses afloat in the face of soaring inflation and interest rates in the 1980s appreciate the determination of successive Reserve Bank governors and governments to ensure that doesn’t happen again.

 


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