KEY POINTS:
"I'm ruthless in my performance assessments - that's why I've given myself a 5/10 for my failure to persuade Kiwis to shift away from their debt-binges in 2006 and over-investment in housing.
"But is it really all my fault? Michael's still spending lots himself, he's ruled out capital gains taxes to stop the property binge, the Aussie banks won't shut off the loans tap, Japanese investors are soaking up our bonds. Something will give this year - it won't be me."
That was the somewhat tongue-in-cheek assessment I wrote earlier this year when I put myself in Alan Bollard's shoes for a few minutes and indulged in a bit of self-criticism of my (imaginary) performance as governor of the Reserve Bank.
I didn't know - at that stage - about the confidential meeting that Bollard had attended in Finance Minister Michael Cullen's office along with his Treasury counterpart John Whitehead to try to nut out a bi-partisan accord with National leader John Key and finance spokesman Bill English on how to tackle the perceived imbalances between the execution of monetary and fiscal policy which were causing economic distortions.
Cullen didn't blurt that out until I put the acid on him at a lunch for Auckland businessmen when the furore over his mortgage levy comments threatened to bury the messages he was trying to send in his first major speech for the year.
Had I known then about what really went down at the December meeting and the National politicians' subsequent take-out that Bollard doesn't know what to do - I would have taken a much more Stalinist approach and made the imaginary self-flagellation a public exercise.
It's obvious that the Reserve Bank governor's private advocacy has been too sotto voce to have the desired effect of persuading a finance minister bent on re-election to take a public-spirited approach and renege on the daft tax credit bribes Labour dished up at the 2005 election.
All Bollard could do last week was issue a whimper of a statement, castigating in ever-so-softly terms Labour's expansionary fiscal policy.
It appears far easier for him to demonise house-owners than get the Government to show an example by reining in its own spending.
The reality is that Bollard slapped on the brakes after the election, but took 15 months before finally hitting them again last week by increasing the official cash rate to 7.5 per cent - the highest in the industrialised world.
In reality it was too little, too late. The hawk has kept his talons sheathed for so long that his credibility is fast evaporating.
The economy is already cooling, profits are coming down, the dairy sector is under pressure and business confidence will be knocked for six as the exchange rate persists at levels which will disincentivise the more nervous from taking up the Government's Export Year challenge.
Key and English have effectively spelled out they have lost confidence in Bollard's monetary policy.
Cullen can't even have a conversation about household mortgage levies - still the most rational answer to reducing time lags and getting a more responsive monetary policy - without a focus group-driven prime minister getting the willies.
Instead of punishing property investors' self-reliance, the Government should look at why more New Zealanders do not invest in the so-called productive sector.
If the Government reduced taxes on dividends, allowed Kiwis to write off the interest costs associated with any borrowing to buy shares, and wiped all capital gains taxes in this area there would be a big behavioural shift.
