Adrian Orr not letting Grant Robertson off the hook
Wednesday, 13 November 2019
Grant Robertson could have been forgiven for thinking Reserve Bank Governor Adrian Orr was finally cutting him a break when he put out his latest Monetary Policy Statement (MPS) on Wednesday.
Each quarter, the Bank puts out a report on what it's thinking about monetary policy, essentially the Official Cash Rate, which sets the interest rates that banks charge.
Recently, Orr has been making loud noises, essentially calling on Robertson and the Government to loosen the purse strings and get spending to stimulate the economy.
This is called fiscal stimulus - essentially Government spending in areas designed to stimulate economic growth.
**READ MORE:
* Reserve Bank should hold fire on interest rates and let Government do the work
* Concerns about insurers' premiums and their capital make for a double headache
* Reserve Bank board asked to investigate complaints about Governor Adrian Orr’s conduct
Eagle-eyed analysts soon spotted that such calls were missing from the release that accompanied the latest MPS.
Instead, Orr's statement was positive about the effects of the Government's current round of fiscal stimulus feeding through into the economy next year, lifting growth, saying 'stronger fiscal stimulus' would see growth lift during 2020.
They also said 'fiscal stimulus could be greater than assumed'. It's often assumed the effects of the current round of fiscal stimulus has been low to negative.
But Orr was quick to dash any thought that he was letting Robertson off the hook.
Instead, he said, the absence of direct calls for stimulus was more to do with the fact the bank thought it'd made it's position fairly clear.
'You don't have to keep shouting,' Orr said.
'To the extent that it's been repeated many many times in the press I imagine that it's been heard, we don't have anything to add to that,' he said.
Orr said the bank was 'confident' with the current fiscal policy settings, but essentially had to play the hand Robertson dealt it.
'We've been working through what we can do with our tools,' Orr said.
'We operate off whatever the current fiscal policy is,' he said.
There have been growing calls on the Government to spend more to stimulate the economy in the face of the international economic slowdown. Even the usually hawkish National party has indicated it would look to borrow more and invest if it won the 2020 election.
And Orr reminded observers on Wednesday that it was a good time to borrow and invest. The Government had low debt, interest rates were incredibly low and the country had an obvious infrastructure defict.
'This is, if needed, a time to do fiscal spending,' he said.
The bank was comfortable with what it was doing, and suggested it was comfortable with its monetary policy tools being the first line of defence against a slowdown
'Many countries have suggested monetary tools may be secondary to fiscal policy tool's we're not in that position at the moment but we always like to have friends,' he said.
Robertson said the bank had made it 'clear they believe there is sufficient stimulus in the economy for now'.
'The fiscal responsibly that I'm responsible for we're rolling out big investments in transport, health and education infrastructure and in our operating spending and what the Reserve Bank Governor suggests is getting into 2020 those things will see our growth rate increase,' he said.
The bank decided to hold the Official Cash Rate at 1, defying market expectation, which was for a cut.