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Insights 21: 17 June 2022
Dominion Post: Eric Crampton on revenue bonds and Three Waters reform
Podcast: Economic Roundtable discussing the biggest economic issues of the week
Newsroom: Oliver Hartwich on Europe's path to Mexico's debt crisis

Māori deserve better than the RBNZ’s cultural appropriation
Dr Oliver Hartwich | Executive Director |
Pick your favourite bit of bad economic news. How about a 10 percent hike in food prices? 8.6 percent US inflation? Or the stock market crash?

The Reserve Bank Governor should be all over the fragile state of the world economy. Surely, he will figure out how to reduce the RBNZ's settlement balance of more than $40 billion. You would think now is the time to talk to other central banks about avoiding monetary Armageddon.

But you would be wrong to assume any of this. Because at the Central Banking Global Summer Meetings, Governor Adrian Orr delivered an entirely different speech: “Why we embraced Te Ao Māori”.

“Te Ao Māori view encourages us to think holistically and long-term,” explained the Governor.

He went on to declare that “We seek to implement our legislated purpose through the concept of Matangirua ki Matangireia – working in unison, to fulfil our ultimate purpose.”

He then elaborated on that the RBNZ has “also refreshed our values through a reconceptualisation through Te Ao Māori” with the values of wānanga, tauira and taura.

And once again, the Governor likened his bank to the “Tāne Mahuta of New Zealand’s financial landscape.”

In the past, the RBNZ has been criticised for losing focus on its core responsibility of maintaining price stability.

But what I find even more objectionable about the Governor’s speech is something different.

Here is the Reserve Bank that has burdened taxpayers with billions of losses from its quantitative easing programme. That is costing all of us through inflation. Which has dangerously overheated the economy with its ultra-loose monetary policy.

By claiming that his Reserve Bank follows Te Ao Māori principles, the Governor implicitly holds Māori responsible for these outcomes.

If I were Māori, I would find this offensive. Because it is all wrong, and Te Ao Māori has nothing to do with the RBNZ’s mismanagement.

There is nothing holistic or long-term about the RBNZ’s loose policies which got us here. The RBNZ is no strong Tāne Mahuta either. If it was a plant, it would be more of a Pua o te Rēinga, a parasitic flowering plant, rather than a strong Kauri tree.

And as for its proclaimed wānanga, tauira and taura values, well, what is innovative, inclusive or honest about pushing up inflation?

By its cultural appropriation of Te Ao Māori, the RBNZ is abusing Māori concepts. It portrays them in a bad light, but it is not living up to them.

Of all the things one could criticise about the RBNZ’s statements about Te Ao Māori, that is probably the worst. Apart from the fact that Māori are among the groups worst affected by our cost-of-living crisis, of course.

Māori are not responsible for a central bank that has lost its way.

Quality regulation: Reasonable Precaution vs Overkill
Dr Bryce Wilkinson | Senior Fellow |
On 4 June, The Dominion Post published a lengthy and disturbing article highlighting the woes and dilemmas of earthquake safety regulation in Wellington.

It highlighted the arbitrariness of current building standards and decisions. The article cited one property developer and owner as saying that he would never build again in Wellington “unless lawmakers promise not to change the [earthquake] code as often as their underpants".

Nor is it just the standard set by the code, expert assessments are also problematic. Two opinions on the same building can differ disturbingly.

The safety standard itself is disputed.  Should a building be built to survive for 100 years, or can it be built merely to prevent loss of human life during a major earthquake, but have to be demolished in its aftermath?

Another issue raised was flawed incentives. The Wellington Public Library was closed on ‘moral’ rather than legal grounds.

One expert said he would be happy to attend a concert in Wellington’s quake-prone Town Hall. But if on the Wellington Council he would have voted to close it “because my liability is much wider”. He might have added that the cost of unnecessary closure falls on others.

These problems of skewed incentives and inadequate information are intrinsic to government regulation. Is there another way?

There is. Private insurers will assess building risks. So will lenders where the building is collateral for the loan. Builders will not gold-plate a building for safety if tenants cannot afford to rent it. Competition for tenants could see landlords providing potential tenants with reputable building safety assessments.

That market process is how tenants, landlords and developers discover what range for levels of safety private tenants are willing to fund. We would expect less risk averse tenants to occupy riskier buildings. (Public service tenants will likely seek gold-plated safety.)

What about problems of a public good nature? Bits might fall off a building and kill passers-by and customers in a ground floor café or shop could be equally unwitting casualties of an unsafe building.

Liability laws and the above disciplines imposed by insurers and lenders should help. A no-fault (ACC) system reduces that discipline.

This is not to rule out the case for some more directive government regulation to protect the general public.

Nonetheless, allowing tenants to trade price for risk is desirable. One standard does not fit all.

Our reports on earthquake regulations can be found below.

Envying Sisyphus
Dr Eric Crampton | Chief Economist |
Hades, God of the Greek underworld, decreed that Sisyphus, for trying to cheat death, must forever push a heavy boulder up a hill. It would roll back down again every time. And Sisyphus would start the task anew.

Lucky bugger.

Sisyphus only had one rock to deal with. Nobody stood at the top of the hill, releasing more rocks for juggling while Sisyphus tried to keep pushing that boulder up the hill.

A lot of policy rocks are currently rolling down the hill. We’ve put in submissions on some of them.

We explained to the Commerce Commission that real supermarket competition requires removing regulatory barriers to new entrants.

They listened.

The rock was up the hill.

Now Minister Clark wants forced access into supermarkets’ warehouses, which is more likely to increase grocery costs than reduce them. It will require an army of regulators to police. And MBIE’s getting $11 million over four years just to fund responses to this kind of market study.

At the same time, a proposed container deposit scheme would load cost and inconvenience on every household buying beverages in containers, largely to the benefit of the owners of reverse vending machines.

ACC’s been funded to start work on an income insurance scheme that’s never been democratically tested and has no good rationale.

Everything around Fair Pay Agreements is a mess.

The Emissions Reduction Plan largely ignores how the ETS works and will give Councils a new tool for frustrating urban growth. Rather than use ETS revenues for a carbon dividend that would let the government cut the ETS cap faster, the funds will instead provide favours to the government’s carbon favourites. And Cash for Clunkers.

The government’s consulting on Working for Families. It is far easier to worsen than to improve that scheme.

Every day’s Inbox brings pleas about new and surprising regulatory and policy abominations. The combined efforts of Hercules and Sisyphus would not clear it.

In graduate school, my professor of regulation told the class that even if the most an economist might ever achieve is the delaying of a bad regulation by a few months, the value of that breathing space would easily exceed our lifetime salaries many times over. He also reminded us that we’re all part of the equilibrium – things would be far worse without our labours.

He didn’t warn us that we’d wind up envying Sisyphus.

On The Record

Initiative Activities:   
  • Podcast: Oliver Hartwich comments on Europe's path to Mexico's debt crisis
  • Podcast: Economic roundtable with Oliver Hartwich, Eric Crampton and Bryce Wilkinson
All Things Considered
  • Graph of the week: NZ govt budgets (2018 - 2023). The ups and downs of Government spending
  • Why RBNZ embraced Te Ao Māori
  • Working for Families brings some very high effective marginal tax rates. But things could be worse. Consider America
  • Racialism, decolonisation and the revolution in NZ education
  • A macroeconomist walks into a bar fight
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