Andrew Dickens: Quigley's resignation is bad for the economy

Neil Quigley marched off into the sunset at 5.49pm on Friday. Late enough for the news to miss the TV 6pm bulletin.  It’s an old PR trick. Leaving the shock value to dissipate over the weekend before the start of play on Monday. 

It was evidence to me that successive governments and the Reserve Bank have failed to respect each other or realise that even though they are independent their actions combine and affect all of New Zealand 

In the Covid years the Reserve bank reacted and made money essentially free.  But the Labour government wanted to be seen to be doing something, so they started overspending and throwing borrowed money away.  The result was a superheated economy that crashed spectacularly and spectacularly quickly 

So, then the Reserve Bank made money expensive again to attack the overheating.  But the new Government, this time National, again wanted to be seen to be doing something so they cancelled government expenditure throwing us into a deeper economic funk than anyone had expected. 

In both scenarios the governments didn’t seem to realise what was happening at the Reserve Bank. And the Reserve Bank was too proud to take into account the stupidity of governments. 

Government’s need to heed the advice that they give Council’s.  Stick to the knitting. Their job is to do the basics.  Fund Health, Education and the Police.  And build us stuff to help us do business like roads and rail and ferries. Not to worry about the price of butter or the number of supermarkets.  And keep the borrowing as low as is reasonable

Meanwhile let the Reserve Bank worry about inflation and the big financial stuff. 

That’s how successful governments respected the independence of the Reserve Bank and how the last two amateur governments did not. 

The saga also shows how political Treasury is.  Their advice wavers in the wind of whoever is in power and is not to be trusted. 

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Episode Transcript

Speaker 1 (00:00):
So we had the resignation of the chair of the
Reserve Bank on Friday, which shows you just how badly
our economy has been run for the last six years
in my opinion. So Neil quickly marched off into the
sunset at five forty nine pm on a Friday. That's
just late enough for the news to miss the TV
six pm bulletin. That's an old PR trick in it,

(00:20):
leaving the shock value to dissipate over the weekend before
the start of play today. But there we go, and
it's evidence to me that successive governments national and Labor
and the Reserve Bank have failed to respect each other
or realize that even though they are independent, their actions
combine and affect all of us. So back in the
COVID years, the Reserve Bank reacted and made money essentially free,

(00:43):
but the Labor government wanted to be seen to be
doing something, so they started overspending. We all know this.
They started throwing borrowed money away. And the result of
all this free money and all this government spending was
a superheated economy that obviously crashed spectacularly and spectacularly quickly.
So the Reserve Bank then reacted again and made the
money expensive again to attack the overheating put the interest

(01:05):
rates up. But the new government, this time National again
wanted to be seen to be doing something, so they
started canceling government expenditure and that ended out throwing us
into an even deeper economic funk than anyone had expected,
including the Reserve Bank. Now, in both scenarios, the governments
didn't seem to realize what was happening at the reserve

(01:26):
bank of our economy, and the Reserve Bank was too
proud to take into account the stupidity of governments. They
were working against each other. They're supposed to be independent,
but that's all supposed to be pulling together to help us.
All government, i think, needs to heed the advice that
they give to local councils. Just stick to your knitting.

(01:46):
Your job is to do the basics. Fund health and
education and the police, and build us stuff to help
us do business, like roads and rail and ferries. But
you don't have to worry about the price of butter
or the number of supermarkets. The market will do that,
the Reserve Bank will do that. And remember, governments, you
need to keep the borrowing as low as reasonable. Let

(02:07):
the Reserve Bank worry about inflation and the big financial stuff.
But that hasn't happened the last two terms, and that
is what should happen. That's how successful governments respect the
independence of the Reserve Bank, and that's how the last
two amateur governments did not. For more from Early Edition
with Ryan Bridge. Listen live to News Talks at b

(02:28):
from five am weekdays, or follow the podcast on iHeartRadio.