6. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
Does he have confidence in the Governor of the Reserve Bank; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Yes. Like the member, I think he is a considerable improvement on his predecessor.
When the Minister told Bloomberg and the Financial Times that “Some of the markets outside New Zealand have taken what Alan said as a harder message than was Alan’s actual intention,”, is he telling us that the governor did not accurately communicate that the risk of an interest rate hike in New Zealand had indeed increased?
Hon Dr MICHAEL CULLEN Link to this
Overseas markets had read what Dr Bollard said as if a rate rise was imminent, and that clearly was not what Dr Bollard said. I quote what I actually said to Bloomberg—one of the few quotes they have got—“The general consensus is that rates will not be raised, but that the beginning of the easing part of the cycle has been pushed off further into next year, possibly even into early 2008.” That is the general consensus view, which is all I ever say on these matters.
Does the Minister think it cuts across the independence of the Reserve Bank when he, as Minister of Finance, starts acting as some sort of global interpreter for the Governor of the Reserve Bank; surely in a world where monetary policy is set by the independent Governor of the Reserve Bank, if the governor thinks he is being misinterpreted, would not he go and correct that, or does he send the Minister off as some sort of global interpreter to sort it out?
Hon Dr MICHAEL CULLEN Link to this
When somebody puts a question to me offshore that implies that the Governor of the Reserve Bank said that a rates rise is imminent, it is actually incumbent on me as Minister of Finance to correct that person. Unlike that member, I stand for New Zealand manufacturers and New Zealand farmers, not for international money market players.
Does he think a governor who chooses his every adjective with extreme care would appreciate the Minister going off the cuff with his thoughts about the chances of a Reserve Bank interest rate hike, then declaring “I think that’s really what the bank was saying.”?
Hon Dr MICHAEL CULLEN Link to this
The member clearly has not listened to a single answer so far. Questions were put to me that stated quite clearly that the Reserve Bank was about to raise rates at the next, or at least one after, actions. That is clearly not what the Reserve Bank was saying in its last Monetary Policy Statement. As I used to, somewhat unwillingly at times, back up the previous Governor of the Reserve Bank, I do so with the current Governor of the Reserve Bank.
Were his statements not, in fact, a shot across the bow of the Governor of the Reserve Bank, via Bloomberg and the Financial Times, that he does not want to see an interest rate hike, given that that was exactly the strategy he played 2 years ago when he went offshore and started making declarations about interest rate hikes that time as well?
Hon Dr MICHAEL CULLEN Link to this
I will try to explain it again for the poor member. Overseas commentators had interpreted the Reserve Bank’s statement as meaning a rate rise was imminent. To quote again what I said—[ Interruption] If the member would just shut up for a minute. Some of the markets outside New Zealand have taken what Alan said as a harder message than was Alan’s actual intention.
Madam SPEAKERWe did have an understanding last time that members would be heard. If they are not heard, then we get reactions like the House has just heard. I ask the Minister to please address the question and for other members to please respect that answer by enabling it to be heard.
Hon Dr MICHAEL CULLEN Link to this
I will quote again what I said. Some of the markets outside New Zealand have taken what Alan said as a harder message than was Alan’s actual intention. The ANZ commentary was so prissy that it thought that calling Dr Bollard “Alan” was somehow an entrenchment upon his independence. Well, Don, it is not so.
How long would inflation have to stay above the 3 percent target—given it has been there for already a year, and given that the Governor of the Reserve Bank said it would be there, in his estimation, for at least a further year—before the Minister of Finance thought that the governor was outside of the policy target agreements?
Hon Dr MICHAEL CULLEN Link to this
That is primarily a matter for the Governor of the Reserve Bank and for the board of the Reserve Bank, which, as the member’s leader could instruct him, is responsible for the monitoring of the governor’s performance, and it reports to the Minister of Finance.