1 00:00:00,040 --> 00:00:02,240 Speaker 1: So what's Nicolaer up to a review of the RB's 2 00:00:02,279 --> 00:00:04,960 Speaker 1: idea of how to handle COVID is to be independently 3 00:00:05,000 --> 00:00:07,760 Speaker 1: looked into. Of course, we revisit the glory days of 4 00:00:07,800 --> 00:00:10,280 Speaker 1: mass printing free money, loose handouts in a tap that 5 00:00:10,360 --> 00:00:13,280 Speaker 1: seemingly never got turned off. Nikola Willis is with us. 6 00:00:13,280 --> 00:00:16,360 Speaker 1: Good morning, Good morning, Mike. Did you get the political 7 00:00:16,440 --> 00:00:17,840 Speaker 1: reaction you were expecting. 8 00:00:19,120 --> 00:00:22,200 Speaker 2: I was actually quite shocked by what a huge reaction 9 00:00:22,440 --> 00:00:26,720 Speaker 2: labor had to this, because I've been it pains to 10 00:00:26,760 --> 00:00:27,120 Speaker 2: a point. 11 00:00:27,360 --> 00:00:30,600 Speaker 1: You almost said that without laughing, but you gave yourself awake. 12 00:00:30,720 --> 00:00:33,760 Speaker 1: Come on, this is political. 13 00:00:34,040 --> 00:00:39,680 Speaker 2: Well, actually appointing very independent experts who are a professor 14 00:00:39,880 --> 00:00:44,240 Speaker 2: in monetary policy, people with great experience in reserve banking 15 00:00:44,680 --> 00:00:47,639 Speaker 2: to look at did the Reserve Bank get the decisions right? 16 00:00:47,760 --> 00:00:51,519 Speaker 2: Could we learn any lessons? I think is fairly standard 17 00:00:51,520 --> 00:00:54,560 Speaker 2: stuff for a government to do. My suspicion is it 18 00:00:54,560 --> 00:00:58,560 Speaker 2: wouldn't have mattered when we announced this. What the timing 19 00:00:58,800 --> 00:01:01,920 Speaker 2: is the reaction of our political opponents would have been 20 00:01:01,960 --> 00:01:04,320 Speaker 2: to say, oh, this is all terrible. You shouldn't be 21 00:01:04,360 --> 00:01:08,319 Speaker 2: asking these questions. We should be asking these questions, We 22 00:01:08,360 --> 00:01:11,000 Speaker 2: should be doing this process and learning lessons, and that 23 00:01:11,080 --> 00:01:12,240 Speaker 2: is exactly what we will do. 24 00:01:12,560 --> 00:01:14,800 Speaker 1: Should we need to ask questions given it was a 25 00:01:14,840 --> 00:01:18,319 Speaker 1: gargantuan cockup. We all know it was a gargantuan cockup. 26 00:01:18,360 --> 00:01:21,959 Speaker 1: The fallout we have all lived slash living through. Therefore 27 00:01:22,000 --> 00:01:23,000 Speaker 1: there's your inquiry. 28 00:01:24,040 --> 00:01:26,560 Speaker 2: Well, the problem is that the Reserve Bank did its 29 00:01:26,640 --> 00:01:30,040 Speaker 2: own review, marked its own homework and essentially said, look, 30 00:01:30,080 --> 00:01:32,360 Speaker 2: we think nothing to see here, move on. We pretty 31 00:01:32,400 --> 00:01:35,440 Speaker 2: much did what we could and I think that shows 32 00:01:35,520 --> 00:01:39,080 Speaker 2: that there hasn't been enough examination. Because of course in 33 00:01:39,120 --> 00:01:41,600 Speaker 2: the future we would want to do some things differently, 34 00:01:41,760 --> 00:01:45,759 Speaker 2: Let's be dispassionate about what those things are and let's 35 00:01:45,800 --> 00:01:48,160 Speaker 2: make sure that as an institution, the Reserve Bank have 36 00:01:48,240 --> 00:01:51,040 Speaker 2: taken on those lessons. That is, a finance minister, I 37 00:01:51,120 --> 00:01:53,880 Speaker 2: have in placed better protocols for the future and that 38 00:01:53,920 --> 00:01:56,320 Speaker 2: we don't get into a situation when there's another major 39 00:01:56,320 --> 00:01:59,800 Speaker 2: economic event where we lose ten point eight billion dollars 40 00:01:59,800 --> 00:02:02,560 Speaker 2: on the bond market, where inflation spikes up to seven 41 00:02:02,560 --> 00:02:05,080 Speaker 2: point three percent, stays out of band for three years, 42 00:02:05,320 --> 00:02:07,960 Speaker 2: where asset price is spiked by thirty percent. If we 43 00:02:07,960 --> 00:02:11,440 Speaker 2: can prevent that happening again in future, we absolutely should 44 00:02:11,440 --> 00:02:12,639 Speaker 2: and should learn the lessons now. 45 00:02:12,760 --> 00:02:14,400 Speaker 1: Yeah, But the problem is you can't and you won't 46 00:02:14,400 --> 00:02:17,040 Speaker 1: because I quote Paul Conway, who was at the Reserve 47 00:02:17,040 --> 00:02:19,120 Speaker 1: banker's chief economist. He's standing in front of a Sydney 48 00:02:19,160 --> 00:02:22,480 Speaker 1: investment conference talking about the LSAP, the money printing. He 49 00:02:22,520 --> 00:02:24,519 Speaker 1: loved it, lapped it up, said it paid its way, 50 00:02:24,560 --> 00:02:26,440 Speaker 1: couldn't get enough of it. As long as you've got 51 00:02:26,440 --> 00:02:29,320 Speaker 1: a person like that in a position like his or 52 00:02:29,360 --> 00:02:31,320 Speaker 1: in his position, you're going to get the same result, 53 00:02:31,360 --> 00:02:31,720 Speaker 1: aren't you. 54 00:02:32,360 --> 00:02:36,600 Speaker 2: And that's why we've appointed independent experts to say, hang on, 55 00:02:36,760 --> 00:02:41,040 Speaker 2: Reserve Bank, actually, with a refreshment of a bit of time, 56 00:02:41,480 --> 00:02:44,240 Speaker 2: and it's some external perspective, why don't we think again, 57 00:02:44,360 --> 00:02:47,359 Speaker 2: and why don't you take on board some of these critiques. 58 00:02:47,400 --> 00:02:49,520 Speaker 2: And the only way really to ensure that is that 59 00:02:49,560 --> 00:02:52,680 Speaker 2: we do do an independent review. In the absence of that, 60 00:02:53,120 --> 00:02:55,320 Speaker 2: I think you're right there are individuals that the Reserve 61 00:02:55,360 --> 00:02:57,680 Speaker 2: Bank who will simply defend everything that they did and 62 00:02:57,720 --> 00:02:58,519 Speaker 2: that's not good enough. 63 00:02:58,639 --> 00:03:00,720 Speaker 1: No it is not. But equally it's the luck of 64 00:03:00,720 --> 00:03:02,920 Speaker 1: the drawer, isn't it. Isn't that the great lesson of COVID, 65 00:03:03,360 --> 00:03:05,080 Speaker 1: who was the government of the day, and if you 66 00:03:05,120 --> 00:03:07,040 Speaker 1: were lucky, you got through it better than if you 67 00:03:07,080 --> 00:03:08,799 Speaker 1: were unlucky. We were unlucky. 68 00:03:10,120 --> 00:03:12,840 Speaker 2: Well, I think this is about the future. It's less 69 00:03:12,880 --> 00:03:15,480 Speaker 2: for me about who was to blame and who we 70 00:03:15,520 --> 00:03:19,799 Speaker 2: can tell what's wrong. What it is about is saying, well, 71 00:03:19,800 --> 00:03:21,760 Speaker 2: if you were doing it again, how would you prevent 72 00:03:21,840 --> 00:03:25,120 Speaker 2: some of the overspending, How would you prevent some of 73 00:03:25,200 --> 00:03:28,360 Speaker 2: the over use of this money printing tool, How would 74 00:03:28,360 --> 00:03:31,320 Speaker 2: you make sure you got it right? And so, Actually, 75 00:03:31,360 --> 00:03:33,400 Speaker 2: this is about the future and doing it better in 76 00:03:33,400 --> 00:03:35,920 Speaker 2: the future. If we were to repeat the mistakes of 77 00:03:36,040 --> 00:03:39,400 Speaker 2: COVID and just blindly ignore the lessons of history, I 78 00:03:39,400 --> 00:03:40,800 Speaker 2: think that would be a major failure. 79 00:03:40,920 --> 00:03:43,440 Speaker 1: Who's the bigger criminal, then, the Reserve Bank or the government? 80 00:03:43,920 --> 00:03:46,160 Speaker 2: Do you think, Well, what we've put in the terms 81 00:03:46,200 --> 00:03:48,760 Speaker 2: of reference for this reviewer is let's look at how 82 00:03:48,800 --> 00:03:53,200 Speaker 2: the monetary policy response was coordinated with the fiscal policy response, 83 00:03:53,280 --> 00:03:56,760 Speaker 2: because you can't have the reserve being operating in isolation 84 00:03:57,400 --> 00:03:59,760 Speaker 2: from what the government is doing. So if they're printing 85 00:03:59,760 --> 00:04:01,760 Speaker 2: a lot of money and then the government's borrowing lots 86 00:04:01,760 --> 00:04:05,040 Speaker 2: of money, those two things constantin are together, and so 87 00:04:05,400 --> 00:04:07,640 Speaker 2: that question of how it's coordinated is one of the 88 00:04:07,640 --> 00:04:08,680 Speaker 2: things we're going to examine. 89 00:04:08,720 --> 00:04:11,520 Speaker 1: So the wage subsidy is an interesting one. So Robinson 90 00:04:11,520 --> 00:04:13,160 Speaker 1: at the time said, just get the money out there, 91 00:04:13,200 --> 00:04:15,520 Speaker 1: save some jobs. There's no question he did save jobs, 92 00:04:15,600 --> 00:04:18,160 Speaker 1: because that's how jobs get saved. You simply print money 93 00:04:18,160 --> 00:04:19,800 Speaker 1: and you can save a job. But there was nothing 94 00:04:20,160 --> 00:04:22,920 Speaker 1: more robust around that. Is that the sort of nuance 95 00:04:23,000 --> 00:04:24,479 Speaker 1: potentially you're looking for or not. 96 00:04:25,360 --> 00:04:28,960 Speaker 2: Yeah, Look, I fully acknowledged support for the economy was required. 97 00:04:29,400 --> 00:04:32,560 Speaker 2: And so the question that we're asking is, well, the 98 00:04:32,560 --> 00:04:35,440 Speaker 2: benefits that occurred because there was this money printing and 99 00:04:35,480 --> 00:04:39,240 Speaker 2: this borrowing are known. But let's examine what the costs 100 00:04:39,279 --> 00:04:41,280 Speaker 2: were and then do a way up of the benefits 101 00:04:41,279 --> 00:04:43,560 Speaker 2: for the of the costs and ask ourselves, did we 102 00:04:43,640 --> 00:04:46,160 Speaker 2: just maybe go a bit too far? And in future, 103 00:04:46,200 --> 00:04:49,840 Speaker 2: how would we calibrate that better? And Look, I think 104 00:04:49,880 --> 00:04:52,839 Speaker 2: the idea that New Zealanders shouldn't have this information before 105 00:04:52,839 --> 00:04:56,640 Speaker 2: the election is really wrong because actually it does have 106 00:04:56,680 --> 00:04:59,479 Speaker 2: a bearing on the democratic process. It does have a 107 00:04:59,520 --> 00:05:02,680 Speaker 2: bearing on the way that people position themselves for the future. 108 00:05:03,279 --> 00:05:05,680 Speaker 1: Just while I've got you asb out yesterday's you'll be 109 00:05:05,680 --> 00:05:08,280 Speaker 1: well aware with another profit, but more importantly, their margins 110 00:05:08,320 --> 00:05:11,080 Speaker 1: are up. Again, have you achieved nothing with these guys? 111 00:05:11,120 --> 00:05:13,720 Speaker 1: If you argue what you do that there's something a 112 00:05:13,800 --> 00:05:15,919 Speaker 1: miss here in the banking sector, if the margins are 113 00:05:15,960 --> 00:05:17,120 Speaker 1: still going up, explain that. 114 00:05:18,440 --> 00:05:20,719 Speaker 2: Well. What I am pleased to see is we're seeing 115 00:05:20,720 --> 00:05:23,680 Speaker 2: more banks switching, which is to say New Zealanders are 116 00:05:23,720 --> 00:05:26,520 Speaker 2: shopping around. They are saying to their bank, can I 117 00:05:26,560 --> 00:05:29,160 Speaker 2: get a better deal elsewhere? That's what you want to 118 00:05:29,200 --> 00:05:31,760 Speaker 2: see when there's competition occurring in a market. So I'm 119 00:05:31,800 --> 00:05:34,559 Speaker 2: pleased to see that. But it is also the case 120 00:05:34,640 --> 00:05:38,160 Speaker 2: that our work on banking competition continues and we are 121 00:05:38,200 --> 00:05:42,480 Speaker 2: looking at questions of how our regime compares with international regimes, 122 00:05:42,839 --> 00:05:45,279 Speaker 2: whether or not what's happening in New Zealand is equivalent 123 00:05:45,320 --> 00:05:48,360 Speaker 2: to what those banks experience in Australia, and whether or 124 00:05:48,400 --> 00:05:50,560 Speaker 2: not we're getting the settings right. I'm taking a range 125 00:05:50,600 --> 00:05:53,039 Speaker 2: of advice. This is technical stuff. You have to be 126 00:05:53,200 --> 00:05:56,440 Speaker 2: very careful. My bottom line is I want New Zealanders 127 00:05:56,520 --> 00:06:00,360 Speaker 2: using banking services to be better off, and so that's 128 00:06:00,400 --> 00:06:01,960 Speaker 2: the way that we're looking at these issues. 129 00:06:02,040 --> 00:06:05,080 Speaker 1: I appreciate it and Nikola Willis's Finance Minister, Mike, is 130 00:06:05,080 --> 00:06:07,360 Speaker 1: there any chance the inquiry might find collusion between the 131 00:06:07,400 --> 00:06:09,880 Speaker 1: Reserve Bank and the government at the time. The collusion 132 00:06:09,960 --> 00:06:13,360 Speaker 1: is the wrong word. I mean, the bank is allegedly independent. 133 00:06:13,400 --> 00:06:16,000 Speaker 1: But what happened, I think it's fairly clear now is 134 00:06:16,040 --> 00:06:18,000 Speaker 1: that the Robertson view of the world happened to be 135 00:06:18,000 --> 00:06:20,080 Speaker 1: the all view of the world, and so they happen 136 00:06:20,120 --> 00:06:23,560 Speaker 1: to be chums. Mike announcing the Reserve Bank inquiries already 137 00:06:23,600 --> 00:06:25,720 Speaker 1: revealed things. I never realized that Grant Robinson had to 138 00:06:25,760 --> 00:06:28,160 Speaker 1: sign off the money on printing. I just thought it 139 00:06:28,200 --> 00:06:30,000 Speaker 1: was a leader that the Reserve Bank. Paul Well, I 140 00:06:30,040 --> 00:06:33,320 Speaker 1: don't know that your colin necessarily drawn that correctly. Either 141 00:06:34,000 --> 00:06:37,880 Speaker 1: what in essence happened, or is supposed to happen, is 142 00:06:37,920 --> 00:06:40,960 Speaker 1: when the Finance Minister of the day decides to spend 143 00:06:41,080 --> 00:06:44,560 Speaker 1: like there's no tomorrow, the Reserve Bank is supposed to go, 144 00:06:44,680 --> 00:06:48,040 Speaker 1: whoa hold on, that's inflationary, will tighten things up? They 145 00:06:48,040 --> 00:06:51,599 Speaker 1: did exactly the opposite, and so having concluded that, you 146 00:06:51,600 --> 00:06:53,200 Speaker 1: can probably ask why we need a review? 147 00:06:53,839 --> 00:06:56,720 Speaker 2: For more from the Mic asking Breakfast listen live to 148 00:06:56,839 --> 00:06:59,880 Speaker 2: news talks. It'd be from six am weekdays, or follow 149 00:06:59,880 --> 00:07:01,520 Speaker 2: them podcast on iHeartRadio.