High on Grant Robertson's agenda was his meeting with Federal Reserve chairman Jerome Powell, which happened on Thursday. Photo / Supplied
High on Grant Robertson's agenda was his meeting with Federal Reserve chairman Jerome Powell, which happened on Thursday. Photo / Supplied
ANALYSIS
The "jamboree for finance ministers" is virtually over by the time I catch up with Grant Robertson in the lobby of the Marriott Metro in Washington DC earlier today.
This is a worrying time for Finance Ministers.
"Everybody is girding their loins for a tough 2023 having been througha tough 2022," says Robertson.
But there are lessons to be drawn from Robertson's short time in Washington, especially from the UK's extraordinary political and financial disaster which saw Prime Minister Liz Truss recall Britain's Chancellor of the Exchequer, Kwasi Kwarteng, back from DC to relieve him of his duties.
Kwarteng was sacked three weeks after a controversial mini-budget of unfunded personal and corporate tax cuts sent financial markets into meltdown and the pound to its lowest level against the US dollar in decades.
"What has been happening in the UK was on everyone's lips but not in the formal part of the discussions," says Robertson.
Former British Chancellor of the Exchequer Kwasi Kwarteng, left, and British Prime Minister Liz Truss. Photo / AP
"Everybody is aware of the cost of living crisis. We're affected by some different elements than the northern hemisphere, but some of the same ones," he says, describing the Truss Government's own initial tax cuts response to the UK's cost of living crisis as "ideological".
He recounts an observation by Kwarteng's successor Jeremy Hunt that the markets wouldn't have reacted the way they did if it hadn't been for the high level of net UK Government debt, running at 97 per cent.
"The salutary lesson is the importance of balance in our approach at this moment," says Robertson.
"We have given monetary policymakers a job. Our job is to work alongside that and be friends and recognise the huge and important things we did during Covid had a fiscal side ... and we now need to stabilise that position.
"The balance across those three things - the cost of living crisis, fiscal consolidation and being able to make investments in those critical areas around climate and infrastructure - that was a feature for everyone, but it's a delicate balance."
The finance ministers, treasury heads, central bankers, investment bankers, economists and advisers of all prescriptions from 190 member countries had come to DC for the "fall meeting" of the International Monetary Fund (IMF) and World Bank.
IMF managing director Kristalina Georgieva told them the world was entering a new danger zone, one more prone to shocks that could quickly knock countries off course.
"After navigating extraordinary challenges over the past two-and-a-half years, further extraordinary challenges lie before us. Indeed, the part ahead is likely to be as tough, if not tougher."
Bringing down inflation while formulating the appropriate fiscal policy was key, she told them, warning that policymakers had an incredibly narrow path to walk, with "no room for missteps".
By Sunday, Robertson had been on the road for a week, first spending several days with a group of CEOs, hosted in New York by the Air New Zealand board, for some stellar thought leadership sessions or as the finance minister terms it, professional development for CEOs.
"The somewhat gloomy mood we picked in New York has carried through to Washington. Old hands from the IMF and World Bank said this was one of the gloomiest meetings they have ever been at," recounts Robertson.
"The Europeans are spectacularly downbeat, Ukraine being a major factor in that, and the energy crisis.
"The Americans are a mixed bag. Clearly that mood you heard in New York about the likelihood of recession, they are backing that now," he adds.
"Among those in our area, the Asia-Pacific is slightly more positive but very wary of the spillover effects of the aforementioned crises."
High on Robertson's agenda was his meeting with Federal Reserve chairman Jerome Powell, which happened on Thursday.
He came armed with a set of All Blacks cufflinks ("he was very pleased to get them") and found Powell genuinely interested in New Zealand's perspective, having been a bit ahead on the tightening cycle than many other countries.
"He was interesting. He says there is light at the end of the tunnel and he kept coming back to employment, where there are four jobs for every job seeker.
"Everyone was wary. He was a bit more upbeat."
Climate change also featured high in Robertson's discussions.
He says climate is clearly an environmental issue, but is also now an economic one as Governments and businesses grapple with the right tools to use.
In 2021, New Zealand committed $1.3 billion in grant-based climate finance to the Pacific over 2022-2025. Of that, half is direct aid to the countries, and the other half to fund climate adaptation initiatives.
"The mention of over $1 billion of climate finance made people sit up. How is that going to work?" he says.
"The issue is how to cooperate with the World Bank, the ADB (Asian Development Bank) and the big donors in the Pacific, to see that climate finance deals with the adaptation issues, but also to be aware of the political context issues with the Pacific a contested space."
'No need to throw globalisation out'
Geopolitics overlaid the meeting, especially China and the US, but also the Russia-Ukraine war.
He says the "Pacific" component of the Asia-Pacific was getting more of a focus and he put that down to geopolitical concerns.
He noted the "quite extraordinary" meeting between President Joe Biden with Pacific leaders and significantly increased involvement in the Pacific from the IMF and World Bank, which he says New Zealand welcomes.
The Biden Administration's sweeping new export controls restricting "US persons" from involvement in manufacturing chips in China was a bone of contention.
"It seemed a negative shift in terms of the US-China relationship as it walls people on the ground out of China.
"I reiterated with New Zealand we will always have an independent foreign policy.
"You don't need to throw globalisation out even if countries are more focused on their national interest."
-Fran O’Sullivan was a guest of Air New Zealand on the direct flight to New York
