Labour’s Finance spokesperson Grant Robertson told TV One’s Q+A programme that the Reserve Bank’s mandate is broken.
‘Actually, it is. And we do need to review monetary policy. Again, I don’t see any sign of the government doing that. But the Reserve Bank Governor has come to our Parliamentary Select Committee the last three times hoping to have brought the currency down and walked in and it’s gone up. So there are problems with that.
Asked what he would do, Mr Robertson replied, "We need to review the policy targets agreement. The focus on inflation comes from a period of time where that was the be-all and end-all. Of course we want to control inflation, but we’ve got to see monetary policy actually be realistic about other goals in the economy.
"It’s actually time for us to get back and take another look at the new world of monetary policy. But the truth is stimulating the economy through rate cuts is now a questionable proposition. He’ll do it. I’m sure he’ll do it. But at the moment that connection is broken."
RAW DATA: Corin Dann interviews Grant Robertson on Q+A
CORIN I wonder if you could give us a sense of how a future Labour government would navigate its way through its economic issues in a world of post-Brexit, of potentially a Donald Trump presidency. It’s a pretty scary place. What would be your priorities?
GRANT The priority has to be building wealth in New Zealand from the ground up. I mean, the lesson coming out of Brexit that I think we’ve all got to take is that there are a lot of people who do not feel that they’ve benefitted from globalisation. And you can’t tell people that their lives are good when they’re not feeling it. We as a country need to be a trading nation, but the era of trickle-down economics is over. The OECD, the IMF, all these people are saying that is not the path forward. What we’ve got to do is think about how we create some security in our economy. We’ve got to add value to products. We’ve got to be developing regional economies. We’ve got to be using the power of government procurement to support New Zealand businesses. We’ve got to rethink the way we build wealth in New Zealand and not rely on the fact that we can go on forever accepting trickle-down.
CORIN Is that a return to spending more, taxing more, in order to do that?
GRANT It’s a return to making sure that we invest in New Zealanders. So, yes, there will be some more spending. We need to be spending more on infrastructure. You see that in every large city in New Zealand. We need to be investing more in education, because we have to have people who have got adaptable skills to create the jobs of the future. So, yes, it will mean investing more. Of course we want people to pay a fair share in our system, in our tax system, but we simply can’t sit back and think that the market is going to solve everything. That era is over. We need a new kind of economy based on what we’re good at producing in New Zealand, developing that up and building that wealth from our regions, from our small businesses. The lesson out of both Brexit and Trump is that if politicians stop listening and have the assumption that they’ve got all of the answers, we’re going to get it wrong. We need to work with our communities to build that wealth.
CORIN Sure. With housing, I don’t think I’ve heard any politician agree with the likes of Arthur Grimes that we need to crash the housing market by 40%. Nevertheless, I don’t think anyone could say that you’re going to be able to make houses cheaper. I mean, where exactly do you sit on this? Do you want to make houses cheaper or are they going to just rise by a little bit?
GRANT We need a much more stable and sustainable housing market. So I’ve got no desire to crash the market, and I think Arthur knows, actually, that what he’s saying there is he’s trying to raise a flag.
CORIN By why not? Because you cannot make houses affordable unless something like that happens.
GRANT No, what you can do is return to a much more stable and sustainable housing market. We want to see wages lift as well at the same time so we get a much better wage to house price ratio. But crashing the market will have other consequences that would be very detrimental.
CORIN What sort of ratio would you like to see?
GRANT It used to be that 3:1 was good. We’ve got an average around New Zealand of about 6:1 now, and nearly 10:1 here in Auckland. So let’s start bringing that Auckland one down and let’s start bringing the overall New Zealand one down.
CORIN But I guess it comes back to you talk about wanting to diversify, grow the economy, etcetera, but they’re long-term goals, aren’t they? You can’t suddenly bring up New Zealand wages to where they’re going to get that ratio back, are you? I mean, how are you going to bring up wages in such a vast way?
GRANT Exactly. But this is why you’ve got to have a plan to do. I mean, we’ve currently got a government that’s prepared to sit on the side lines and hope for the best. So, yeah, you build it up from saying, ‘We’re going to lift up the value chain.’ We’re going to talk to the farmers who are currently looking at a pay-out that’s not even going to get to breakeven until 2019. Say to them, ‘We’re going to work with you to have added-value products so you’re not just relying on whole milk powder.’ We’re actually going to get alongside regions and provide the infrastructure so that they can have job opportunities there. Yes, this will take time, but at the moment we’ve got a government that’s in complete denial of the fact that the economy is built on speculation and immigration. That is not a sustainable path.
CORIN So what does it look like if it’s not sustainable? Because as you say, we’re growing at about 3%. The economy is actually growing. The here and now of the economy is very strong. Bill English says people have been saying for a long time now that one thing or the other was going to knock it down, is it doomsayer stuff?
GRANT No, because per person, the economy is not growing. The truth is—
CORIN It is growing a little bit per person. It’s not negative.
GRANT It’s barely moving per person, and that means that that is not a sustainable strategy. Just having the population grow and relying on the fact that we might be a fantasy holiday destination for some retired American people isn’t a sustainable plan for the economy.
CORIN Growth’s growth. What does it matter?
GRANT It matters if people aren’t feeling it. If you’ve got a situation—
CORIN Are you telling me if you go to downtown Auckland at the moment that people aren’t feeling it? There is growth. There are jobs. I mean, unemployment is probably going to go below 5%.
GRANT I don’t know about that. I don’t think it will, actually. But if you go out to South Auckland, you’ve got people who are struggling to find a house. How can it be an economy that’s going well when primary school teachers can’t afford to live in Auckland? When nurses can’t afford to live in Auckland? This is not an economy that’s benefitting the vast bulk of New Zealanders. Fortunate few, people who’ve owned houses for a long time maybe, but the vast bulk of New Zealanders aren’t doing well out of this.
CORIN It’s clear that obviously some people aren’t doing well. But is it the vast bulk of New Zealanders? Because we’re seeing strong support for the government. 65% of Kiwis who own home are doing perfectly fine.
GRANT When I talk to those New Zealanders who own homes, what they’re worried about is will their children own homes in the future? Will their grandchildren own homes in the future? What kind of communities will we have? So I actually think on housing, which is the core of building those strong communities, we actually do want change. New Zealanders do want to see a much fairer access for people to own their home, to have security in renting, for people who can’t house themselves to have state housing. That only happens with a comprehensive plan. The government is denying there’s even a problem here. We’re providing some answers.
CORIN Would you cut interest rates in a couple of weeks when the Reserve Bank meets?
GRANT I don’t get to do that.
CORIN Let me put it this way – are you in the camp that thinks inflation is so low we’ve got to cut?
GRANT Look, my view is that’s exactly what the Reserve Bank Governor will do, because that’s the mandate that the Governor has. What he’s been trying to say over the last few weeks is to government, ‘You’ve got a responsibility.’ Because all we hear from the National Party is what the Auckland Council should do, what the Reserve Bank should do. Within their mandate, the bank’s doing what they can. It’s the turn of the government to step up.
CORIN But is that mandate broken?
GRANT Actually, it is. And we do need to review monetary policy. Again, I don’t see any sign of the government doing that. But the Reserve Bank Governor has come to our Parliamentary Select Committee the last three times hoping to have brought the currency down and walked in and it’s gone up. So there are problems with that.
CORIN So what would you do?
GRANT We need to review the policy targets agreement. The focus on inflation comes from a period of time where that was the be-all and end-all. Of course we want to control inflation, but we’ve got to see monetary policy actually be realistic about other goals in the economy.
CORIN The great fear is that we’re going to enter some deflationary spiral or something, prices are going to fall through the floor. Do you fear that?
GRANT It’s a possibility, but I think what we’ve got to focus on is making sure that monetary policy supports goals like full employment – or as close to full employment as we can get – that it takes into account the rest of the health of the economy. Other countries do this. We were first off the blocks with the Reserve Bank Act. It’s actually time for us to get back and take another look at the new world of monetary policy. But the truth is stimulating the economy through rate cuts is now a questionable proposition. He’ll do it. I’m sure he’ll do it. But at the moment that connection is broken.
CORIN Just finally, what do you make of Donald Trump’s speech on Friday? He seems to have the same trade policy as you.
GRANT Look, he’s got concerns about the trade policy. They might be different concerns to the one we’ve got. What I think that means for the TPP, with both Hilary Clinton and Donald Trump saying they either want to change it significantly or not sign it, is that I don’t think it will get through in this term, and then there’ll be the possibility of renegotiation.
CORIN But doesn’t it also show that if the Americans are so concerned about losing sovereignty, then perhaps some of the concerns that New Zealanders have aren’t misplaced about big business in America? They’re worried about us taking their jobs.
GRANT It goes in both directions. I mean, if we look at the housing things, one of the things we want to do is say to offshore speculators, ‘You cannot buy existing housing.’ The TPP stops us from doing that. So housing’s the centre of the debate. I think we’re in the right position there to say, ‘We deserve the right to make our own law to say that we won’t have offshore speculators in our housing market.’
CORIN And you’d forego the TPP because of that clause?
GRANT That’s been Labour’s very clear position. And, look, this housing market is now causing instability in our economy. We need to have the right to make decisions like banning offshore buyers.
CORIN Grant Robertson, thank you very much for you time.