1 00:00:00,160 --> 00:00:02,759 Speaker 1: Do you remember how the Reserve Bank printed huge amounts 2 00:00:02,800 --> 00:00:05,400 Speaker 1: of money during COVID. This was the so called Large 3 00:00:05,440 --> 00:00:08,119 Speaker 1: Scale Asset Program, which was worth fifty five billion dollars. 4 00:00:08,480 --> 00:00:11,040 Speaker 1: The Bank has just published new research that concludes that 5 00:00:11,119 --> 00:00:14,920 Speaker 1: none of it meaningfully contributed to our huge inflation problem, because, 6 00:00:14,920 --> 00:00:17,520 Speaker 1: of course not. Jane Tipsrani is The Herald's Wellington Business 7 00:00:17,600 --> 00:00:19,880 Speaker 1: editor and after a very long period away is back 8 00:00:19,920 --> 00:00:22,920 Speaker 1: with us. Hello Jane, Hi, Heather, welcome back. Now do 9 00:00:22,960 --> 00:00:24,680 Speaker 1: we buy this argument from Paul Conway? 10 00:00:25,720 --> 00:00:28,480 Speaker 2: Yeah? Look, I mean I'm no expert, but I'll explain 11 00:00:28,680 --> 00:00:31,800 Speaker 2: the thinking. So at the pandemic, as you said before, 12 00:00:31,840 --> 00:00:36,760 Speaker 2: the Reserve Bank effectively created fifty five billion dollars, used 13 00:00:36,800 --> 00:00:41,199 Speaker 2: that money to help keep interest rates down, tried to 14 00:00:41,240 --> 00:00:45,120 Speaker 2: stimulate the economy. Of course, in twenty twenty one twenty 15 00:00:45,159 --> 00:00:48,520 Speaker 2: twenty two, we had huge inflation. Now a lot of us, 16 00:00:49,280 --> 00:00:52,040 Speaker 2: you know, would point the finger at the whole government 17 00:00:52,040 --> 00:00:55,279 Speaker 2: Reserve Bank response, But often there's been this narrative that 18 00:00:55,320 --> 00:00:59,600 Speaker 2: the money printing part was a major contributing factor. Now 19 00:01:00,080 --> 00:01:03,120 Speaker 2: Conway and staff at the Reserve Bank said actually no, 20 00:01:03,480 --> 00:01:07,200 Speaker 2: like yes, it had an effect, but not a huge effect. 21 00:01:07,680 --> 00:01:13,319 Speaker 2: The reason is because that program largely affected the exchange rate, 22 00:01:13,640 --> 00:01:17,080 Speaker 2: so it weakened the New Zealand dollar. That helped exporters, 23 00:01:17,120 --> 00:01:21,600 Speaker 2: and that boosted the economy. Basically, they're saying that, unlike 24 00:01:21,640 --> 00:01:26,160 Speaker 2: the OCR it didn't have a big effect on consumer demand. 25 00:01:26,640 --> 00:01:29,720 Speaker 2: So when the Reserve Bank cuts the OCR, that affects 26 00:01:29,760 --> 00:01:33,399 Speaker 2: short term interest rates, that makes people's mortgages cheaper and 27 00:01:33,520 --> 00:01:35,759 Speaker 2: gets them out in the economy spending more. That has 28 00:01:35,840 --> 00:01:40,160 Speaker 2: more of a direct impact on economic demand and therefore inflation. 29 00:01:40,720 --> 00:01:44,839 Speaker 2: So Paul Conway is saying, look, you know, money printing 30 00:01:44,920 --> 00:01:48,480 Speaker 2: isn't perfect, lots of downsides, but we should be weary 31 00:01:48,520 --> 00:01:51,720 Speaker 2: of pointing to that and isolating it and saying, don't 32 00:01:52,080 --> 00:01:54,240 Speaker 2: never do that again, because it's the reason we had 33 00:01:54,440 --> 00:01:55,160 Speaker 2: large inflation. 34 00:01:55,400 --> 00:01:57,680 Speaker 1: Do we also buy the argument that even though they 35 00:01:57,720 --> 00:02:00,240 Speaker 1: lost nearly eleven billion dollars, it was okay because it 36 00:02:00,320 --> 00:02:01,920 Speaker 1: drove up the tax take for the government, so it 37 00:02:01,920 --> 00:02:02,720 Speaker 1: paid for itself. 38 00:02:03,520 --> 00:02:05,720 Speaker 2: Yeah. Look, this has been a issue that I've had for 39 00:02:05,760 --> 00:02:09,840 Speaker 2: some time. Basically because of the mechanics of the money 40 00:02:09,880 --> 00:02:13,160 Speaker 2: printing it it came at a direct cost to the 41 00:02:13,200 --> 00:02:16,320 Speaker 2: government of about nearly eleven billion dollars that's a lot 42 00:02:16,360 --> 00:02:20,560 Speaker 2: of money, right, But the Reserve Bank is saying that 43 00:02:20,639 --> 00:02:23,880 Speaker 2: actually the large show as a purchase program did stimulate 44 00:02:23,880 --> 00:02:26,600 Speaker 2: the economy. You know, that meant people paid more tax 45 00:02:27,320 --> 00:02:30,400 Speaker 2: and it also suppressed the interest rates that the government 46 00:02:30,520 --> 00:02:32,440 Speaker 2: paid for all the debt that it took out at 47 00:02:32,440 --> 00:02:35,440 Speaker 2: the time, and for the first time it tried to 48 00:02:35,440 --> 00:02:37,560 Speaker 2: put some numbers to that. Now, it's very hard to 49 00:02:37,600 --> 00:02:40,799 Speaker 2: put numbers to that to say, you know, the government 50 00:02:40,880 --> 00:02:42,959 Speaker 2: has been did all the stimulus, Now which part of 51 00:02:43,000 --> 00:02:46,040 Speaker 2: the stimulus are we putting down just to this one program? 52 00:02:46,919 --> 00:02:48,760 Speaker 2: And then looking at the costs and saying, well, what, 53 00:02:49,400 --> 00:02:52,600 Speaker 2: you know, how did that benefit the government? The Bank 54 00:02:52,680 --> 00:02:55,080 Speaker 2: has done that for the first time and it said 55 00:02:55,680 --> 00:02:59,040 Speaker 2: it's concluded that the costs and the benefits direct costs 56 00:02:59,040 --> 00:03:01,840 Speaker 2: and direct gain to the government in terms of money 57 00:03:02,160 --> 00:03:05,120 Speaker 2: were about the same. So while we talk a lot 58 00:03:05,160 --> 00:03:08,080 Speaker 2: about this eleven billion dollar cost, they say that the 59 00:03:08,120 --> 00:03:11,280 Speaker 2: tax revenue and the lower interest costs that the government 60 00:03:11,320 --> 00:03:14,040 Speaker 2: faced were about worth the same. 61 00:03:14,800 --> 00:03:17,000 Speaker 1: I mean, the I've got here, Jane, is that they're 62 00:03:17,000 --> 00:03:19,600 Speaker 1: marking their own homework, right, and so everybody's gonna look 63 00:03:19,600 --> 00:03:21,880 Speaker 1: at it a fair explanation, but actually you'd like somebody 64 00:03:21,960 --> 00:03:24,600 Speaker 1: independent to give, you know, to do a similar exercise, 65 00:03:24,600 --> 00:03:25,040 Speaker 1: wouldn't you. 66 00:03:26,360 --> 00:03:29,400 Speaker 2: Yes, And the Reserve Bank did d a review of 67 00:03:29,480 --> 00:03:32,560 Speaker 2: its response and publish those findings in twenty twenty two, 68 00:03:32,639 --> 00:03:35,800 Speaker 2: and it had them pair reviewed. But I have been 69 00:03:35,800 --> 00:03:38,640 Speaker 2: calling for some time for just, you know, for them 70 00:03:38,680 --> 00:03:40,200 Speaker 2: to try to do the maths and to say well, 71 00:03:40,240 --> 00:03:44,120 Speaker 2: this was the cost and this was the direct benefit. 72 00:03:44,160 --> 00:03:46,360 Speaker 2: I mean, it's kind of baffling that it's taken this 73 00:03:46,520 --> 00:03:50,000 Speaker 2: long to get to this conclusion, and it's kind of 74 00:03:50,880 --> 00:03:53,280 Speaker 2: I mean, it's it's kind of unfortunate because all this 75 00:03:53,440 --> 00:03:56,800 Speaker 2: time there has been this narrative that this that money 76 00:03:56,800 --> 00:03:58,760 Speaker 2: printing is a terrible thing because look at the effect 77 00:03:58,760 --> 00:04:01,720 Speaker 2: and look at the cost. I think that what Paul 78 00:04:01,760 --> 00:04:05,160 Speaker 2: Conways tried to do here is to say, yes, you know, sure, 79 00:04:05,560 --> 00:04:09,240 Speaker 2: but here's a more nuanced discussion and here's some modeling 80 00:04:09,280 --> 00:04:11,720 Speaker 2: and here's some figures. So I think that the bank 81 00:04:11,800 --> 00:04:13,280 Speaker 2: can be commended for that. 82 00:04:13,400 --> 00:04:14,640 Speaker 1: Yeah, brilliant. I thank you very much. 83 00:04:14,680 --> 00:04:14,880 Speaker 2: Jane. 84 00:04:14,920 --> 00:04:17,280 Speaker 1: It's nice to have you back. 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