Mike's Minute: I'm not convinced the Reserve Bank was right

You can't bag the Monetary Policy Committee. 

Well, you can, but in this case, you would be fairly churlish. 

Personally, I would have held, but given the vote was done by consensus I clearly would have been a lone voice. 

Three hikes are coming, we may get them every other meeting, and we will end up with a cash rate of 3.25%. 

If you want the glass half full, look at Australia. Their cash rate is well into the 4% and inflation is far from over. And that’s before I get to the upcoming jobs issues, not to mention the property correction. 

But back to us. Inflation is why they are hiking and will continue to hike. 

But, and it's a big 'but', surely there is an argument that says it's not as bad as we feared? And not just that, it's peaked and is trending down – down to exactly where it needs it to be. 

Besides, a lot of the inflation remaining is council rates and cost-plus-accounting from power prices. 

The Taxpayers Union blames the Government, which is an Australian argument, but not applicable here. 

The Government has an operating budget of $2.1 billion, which is anaemic. We are $3 billion better off on latest figures than we thought. 

The Government is not blowing out the inflation. 

But the main reason I would have held is the psychology of pulling the trigger too soon. We are fragile. New Zealand loves a funk and we have been in a funk, and we don’t need misery merchants. 

The bank is clinical, which in part is their job. But a good part of any economy is the psychology of it, the vibe of it, the mood of it. 

We need help on the mood. We need a lesson to get on with it, and we need to be encouraged. A rate hike doesn’t do that. 

Look, this isn't a disaster. It's not even a bad mistake. It's probably just an unwelcome attitude driven by number wonks, not empaths, who could have been a bit more generous. 

New Zealand is on the move again. The bank says 25 points doesn’t hinder that. 

I'm not convinced they're right. 

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Episode Transcript

Speaker 1 (00:00):
Now you can't bag the Monetary Policy Committee. I mean,
will you cam, but in this case you'll be fairly churlish.
Personally I would have held, but given the boat was
done by consensus, I clearly would have been a lone
voice in that room. Three hikes are coming, possibly they
say they think we may get them every other meeting.
We'll end up with the cash rate of about three
point two five if you want class half full. Look
at Australia. Their cash rates well into the fours and

(00:21):
inflation's far from over. And that's before I get to
the upcoming job issues. Not to mention the property correction,
but back to us, inflation is why they're hiking, and
we'll continue to hike butt big butt. Surely there's an
argument that says it's not as bad as we feared,
and not just that it's peaked and it's trending down
down to exactly where it needs to be. And besides,
a lot of the inflation remains council rates and cost

(00:43):
plus accounting from power prices. The Taxpayers Union blamed the
government yesterday, which is a very Australian sort of argument,
but it's not applicable here. The government has an operating
budget of two point one billion. I mean, it's a mnemic.
We are three billion better off, as the latest figure
showed us this week than we thought. The government is
not blowing out. But the main reason I would have
held is the psychology of pulling the trigger too soon.

(01:04):
We are fragile. New Zealanders love a funk, and we've
been in a funk. And we don't need misery merchants.
The Bank are clinical, you see, which in part is
their job, I guess. But a good part of any
economy is the psychology of it, the vibe of it,
the mood of it. We need help on the mood.
We need a lesson on how to get on with it.
We need to be encouraged. A rate hike doesn't do that. Look,

(01:25):
it's not a disaster, it's not even a bad mistake.
It's probably just an unwelcome attitude driven by number wonks,
not impaths who could have been a bit more generous.
New Zealand is on the move again. The Bank says
twenty five points doesn't hinder that. I'm not convinced they're right.
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(01:46):
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