1 00:00:00,160 --> 00:00:03,199 Speaker 1: The Reserve Bank has been busy buying up foreign currency assets. 2 00:00:03,200 --> 00:00:05,520 Speaker 1: It recently sold about two hundred and fifty nine million 3 00:00:05,559 --> 00:00:08,680 Speaker 1: New Zealand dollars to lift its intervention capacity to a 4 00:00:08,720 --> 00:00:12,000 Speaker 1: whopping twenty seven billion dollars. Now genetives Traineye, The Herald's 5 00:00:12,000 --> 00:00:15,400 Speaker 1: Wellington business editor has been taking a look, hijename. Hey, 6 00:00:15,480 --> 00:00:17,160 Speaker 1: give me a bit of context. How big is about 7 00:00:17,160 --> 00:00:18,640 Speaker 1: two hundred and sixty million dollars? 8 00:00:20,200 --> 00:00:23,720 Speaker 2: Look, that's that's pretty big, and it's sort of maybe 9 00:00:23,760 --> 00:00:26,920 Speaker 2: in the realm of the cost of school lunches. 10 00:00:28,720 --> 00:00:30,640 Speaker 1: Do they regularly buy that much? 11 00:00:30,960 --> 00:00:35,319 Speaker 2: Yeah, So, so for the Reserve Bank to actually, we'll 12 00:00:35,320 --> 00:00:38,160 Speaker 2: just take this backstep. So the Reserve Bank sold two 13 00:00:38,200 --> 00:00:41,199 Speaker 2: hundred and fifty nine million dollars of New Zealand dollars 14 00:00:41,920 --> 00:00:45,760 Speaker 2: in March. That is the second highest amount that it 15 00:00:45,800 --> 00:00:49,920 Speaker 2: has sold in more than a decade. So the reason 16 00:00:50,040 --> 00:00:53,680 Speaker 2: it's getting involved in currency markets selling New Zealand dollars 17 00:00:53,760 --> 00:00:56,160 Speaker 2: is so that it can get money to buy foreign 18 00:00:56,160 --> 00:00:59,240 Speaker 2: currency assets. Now, it's quite a normal thing for a 19 00:00:59,320 --> 00:01:02,880 Speaker 2: central bank to have a large balance sheet, have a 20 00:01:02,920 --> 00:01:06,679 Speaker 2: war chest of foreign currency assets, so that if there 21 00:01:06,760 --> 00:01:11,520 Speaker 2: is a financial crisis, it can possibly intervene. Now, the 22 00:01:11,560 --> 00:01:15,640 Speaker 2: threshold for intervention is really high. There's a framework in 23 00:01:15,680 --> 00:01:18,160 Speaker 2: place that the Reserve Bank has agreed to with the government, 24 00:01:18,880 --> 00:01:20,760 Speaker 2: you know, for what the conditions would need to be 25 00:01:20,880 --> 00:01:24,200 Speaker 2: if it did intervene. But I think it is pretty 26 00:01:24,240 --> 00:01:26,839 Speaker 2: significant that, you know, in one month, that it made 27 00:01:26,880 --> 00:01:30,400 Speaker 2: such a large transaction to try to I guess, give it, 28 00:01:30,400 --> 00:01:31,880 Speaker 2: give it, give itself a bit more muscle. 29 00:01:32,280 --> 00:01:35,880 Speaker 1: Now is this is not necessarily a response to or 30 00:01:35,959 --> 00:01:38,200 Speaker 1: an indication that the thinker crisis is coming, right, This 31 00:01:38,240 --> 00:01:40,319 Speaker 1: is something that was agreed with Grant Robertson by memory. 32 00:01:40,920 --> 00:01:43,840 Speaker 2: Yeah, that's right. So the Reserve Bank has spent the 33 00:01:43,880 --> 00:01:47,680 Speaker 2: past two years, you know, buying and selling assets to 34 00:01:48,080 --> 00:01:53,600 Speaker 2: bolster its foreign currency intervention capacity. Now it's actually more 35 00:01:53,600 --> 00:01:56,760 Speaker 2: than doubled that capacity in the past two years to 36 00:01:56,880 --> 00:02:02,040 Speaker 2: nearly twenty seven billion dollars. That's huge. So the Reserve 37 00:02:02,080 --> 00:02:04,440 Speaker 2: Bank agreed with Grant Robinson, look, it's time to update this. 38 00:02:04,520 --> 00:02:06,920 Speaker 2: We need to give ourselves a bit more strength. The 39 00:02:06,960 --> 00:02:09,240 Speaker 2: move that we saw in March was just part of this, 40 00:02:09,440 --> 00:02:12,360 Speaker 2: but it was a particularly large move. Now I asked 41 00:02:12,400 --> 00:02:15,200 Speaker 2: the Reserve Bank, I said, look, what's happened here? Because 42 00:02:15,240 --> 00:02:19,240 Speaker 2: I mean the timing of it is interesting. There's so 43 00:02:19,400 --> 00:02:22,280 Speaker 2: much volatility in markets at the moment you have to think, well, 44 00:02:22,520 --> 00:02:25,280 Speaker 2: why did they buy so much? Sorry, why did they 45 00:02:25,320 --> 00:02:27,680 Speaker 2: sell so much and then buy so much foreign currency 46 00:02:28,040 --> 00:02:32,440 Speaker 2: assets in one month? The bank wouldn't say, but it 47 00:02:32,520 --> 00:02:35,320 Speaker 2: did point me to something where it said that if 48 00:02:35,400 --> 00:02:39,440 Speaker 2: the New Zealand dollar is particularly strong, that might prompt 49 00:02:39,480 --> 00:02:41,919 Speaker 2: it to sell, whereas if it's weak, it might prompt 50 00:02:41,960 --> 00:02:46,200 Speaker 2: it to buy. So that's a thing. But then I 51 00:02:46,240 --> 00:02:48,680 Speaker 2: took to an expert and actually that the New Zealand 52 00:02:48,680 --> 00:02:52,200 Speaker 2: dollar was not particularly strong in March when it made 53 00:02:52,280 --> 00:02:55,680 Speaker 2: that big sale. So it has left me and others 54 00:02:55,720 --> 00:02:58,560 Speaker 2: who are more in the know than I am scratching 55 00:02:58,560 --> 00:03:03,760 Speaker 2: our heads over what the rationale was. You know, it 56 00:03:03,800 --> 00:03:05,760 Speaker 2: does make you think it would be nice if the 57 00:03:05,800 --> 00:03:10,080 Speaker 2: Reserve Bank was a little bit more transparent, because you know, 58 00:03:10,120 --> 00:03:12,200 Speaker 2: while it can't give away its hand and say to 59 00:03:12,240 --> 00:03:14,160 Speaker 2: the market, we're going to do this intervention, because then 60 00:03:14,160 --> 00:03:17,240 Speaker 2: people could be better against it. Yeah, it is important 61 00:03:17,320 --> 00:03:19,919 Speaker 2: that it is, in my view, transparent with us because 62 00:03:19,960 --> 00:03:23,320 Speaker 2: we're talking very large sums of money and there's always 63 00:03:23,320 --> 00:03:26,120 Speaker 2: a risk when its balance sheet is so big that 64 00:03:26,360 --> 00:03:29,720 Speaker 2: these these assets fall in value and that could end 65 00:03:29,760 --> 00:03:34,440 Speaker 2: up costing taxpayers. So I think there is a case 66 00:03:34,480 --> 00:03:37,280 Speaker 2: to be made for a wee bit more transparency from 67 00:03:37,320 --> 00:03:37,640 Speaker 2: the bank. 68 00:03:37,760 --> 00:03:40,000 Speaker 1: Yeah, a bit of explanation. Hey, that's fascinating, Jennae, thanks 69 00:03:40,040 --> 00:03:43,600 Speaker 1: very much, appreciated this genship trainee, The Herald's Wellington Business editor. 70 00:03:44,240 --> 00:03:47,440 Speaker 1: For more from Heather Duplassy Allen Drive, listen live to 71 00:03:47,520 --> 00:03:50,520 Speaker 1: news talks that'd be from four pm weekdays, or follow 72 00:03:50,560 --> 00:03:52,360 Speaker 1: the podcast on iHeartRadio.