Liam Dann: Don't fear the softer stuff from the Treasury and the RBNZ

COMMENT

I'm picking up some scepticism in the business world about the progressive (some would say fluffy) turns that both the Treasury and the Reserve Bank have taken in the past year.

The Treasury is beavering away on the Finance Minister's plans for a wellbeing Budget.

On May 9, Grant Robertson will deliver the annual accounts in a framework that considers environmental, cultural and social issues – possibly a world first.

As Treasury officials put it in their investment statement last year: "Life is about more than money."

True, but it's a surprising statement from the government department in charge of counting our money.

Then there's the Reserve Bank – led by new charismatic Governor Adrian Orr – which is using Māori mythology to underpin a deep look at its social mandate and purpose.

Orr has envisioned our monetary system as Tāne Mahuta, the god of the forest who forced apart the sky and the earth and let in the light.

It's a great narrative but what does that mean for my interest rate – should I fix or float?

Orr's speeches in the past few months have drawn out critics who fear they show a lack of focus on traditional monetary policy.

I'll admit there's a conservative, reactionary old voice in my head that says we need institutions like the Treasury and the RBNZ to stick to their knitting.

The argument is that we do the basics and do them well.

Actually, I hear that reactionary voice a lot these days: get off my lawn you no-good kids!

For many of us middle-aged men it seems to be a symptom of decay, like expanding stomachs and hair growing in our ears.

Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell

Well, I jog, I pluck and I'll be damned if I'll give in to conservatism just yet.

But I digress.

Here's a reason why I'm prepared to give Orr and Robertson a chance to do things differently.

It was a statistic in a column by Herald colleague Brian Fallow that really struck me.

Fallow picked StatsNZ data from the recent household economic survey to highlight the widening of social inequality in the past three years.

From 2015 to 2018 – perhaps the peak of the current economic cycle – the top fifth of the population saw their wealth rise 26 per cent. For the bottom fifth it barely moved at all.

But the numbers that really hit me were the median net worths by ethnicity.

For European New Zealanders that's: $138,000 – 50 per cent higher than the median for the population as a whole.

For Asians $46,000, for Māori $29,000 and for Pasifika people just $15,000.

The contrast is brutal.

And there are no recessions or financial meltdowns to hide behind right now.

This is what inequality in New Zealand looks like after 10 years of economic expansion.

For decades the "two steps forward, one step back" nature of our economic cycles has masked the lack of progress.

But we are now in the second longest period of post-war economic growth.

I'm not taking a radical left turn here.

I'm certainly not about to dismiss concerns about the damage and wealth destruction that aggressive socialist regimes can cause to economies.

The likes of Venezuela and numerous 20th-century regimes do provide a sober warning about the risk of radical change.

But as much as socialist and communist ideology has played its part in these social disasters, so too has the kind of uncaring, conservative capitalism that foments revolutionary upheaval.

Some sort of progressive, positive change seems preferable – especially for a middle-class spectacle-wearing, intellectual wannabe like me.

Let's face it, I'd be straight off to the latrine-digging division of the people's work-farm.

Looking more deeply at the fundamental structure of institutions like the Treasury and the Reserve Bank every few decades seems sensible.

Both go to the heart of our economy – administering our fiscal and monetary policy.

If they need a reset and a more expansive world view then now is the time to do that – while the economy is steady and strong.

The window may be limited. In financial-crisis mode they do have to get back to their knitting.

Nobody is suggesting we divert from the twin-policy paths of low inflation and balanced books that have provided the New Zealand economy with much needed stability.

Inflation is under control and the is OCR lodged in wet cement at 1.75 per cent.

The Crown accounts have been in surplus since 2015.

It looks like we have some time (touch wood) to implement change and integrate it into the system – time to put a bit more focus on the needs of the most disadvantaged.

The hard Left, those who still believe in tearing down the walls of Babylon, will probably argue the warm fuzzy stuff is a window dressing – a salve for liberal guilt.

Perhaps, but I hope that by shifting the dial slightly at a fundamental level, we can see that subtle change flow exponentially through the system.

At the very least the shift to more inclusive language, that both the Treasury and the RBNZ are embracing, should engage a wider audience in economic thought and lift our levels of financial literacy.

That can't be a bad thing.