An external central banking expert has commended the Reserve Bank’s forecasting and monetary policy decision-making processes.
As part of good practice peer review, the Bank regularly commissions reviews by external experts of its forecasting and monetary policy decision-making processes. It has modified its processes over the years in light of their findings.
Dr Philip Turner, former Deputy Head of the Monetary and Economic Department and a member of Senior Management of the Bank for International Settlements (BIS), was requested to attend the February 2017 forecasting round, report on his assessment of the process, and make recommendations where relevant.
This issue of the Bulletin presents Dr Turner’s report back to the Bank.
Dr Turner comments that, in seeking to “avoid unnecessary instability in output, interest rates and the exchange rate”, the Bank’s mandate is realistic about what monetary policy can achieve.
“This mandate would not have been fulfilled in recent years, given the large shocks to international prices, by trying to keep the year-on-year inflation rate in New Zealand at close to 2 percent. To have achieved this, interest rates would have had to move by more than they have in recent years, and this would have created the unnecessary instability in output and the exchange rate that the RBNZ is enjoined to avoid.”
Dr Turner says it was clear that the Bank’s Monetary Policy Committee, which advises the Governing Committee on the monetary policy decision, has in its sights key questions about what might be called the ‘new normal’ for monetary policy.
These include the lower natural or neutral rate of interest; the increased responsiveness of aggregate demand to any change in interest rates; and how macro-prudential policies will affect monetary policy.
He says that the Bank’s open working-level culture of challenging views or arguments in a constructive and professional way enables the Bank to avoid ‘policy blind spots’.
“The whole forecast round has been engineered to bring to bear a full range of economic analyses and to ensure an open and comprehensive debate.”
Dr Turner recommended further work on two topics.
“Both are on the radar screens of RBNZ economists. The first is what the changing labour market under heavy immigration means for non-tradable inflation. The second is what the ‘new normal’ for monetary policy after years of very low interest rates means for future monetary policy. The impact of interest rate increases on the financial industry and on the real economy may be quite different than in the past.”
Dr Turner concludes: “Results over the past few years speak for themselves. The RBNZ has helped steer its economy through several large external shocks. Because it has done so without becoming trapped at a zero policy rate and without multiplying the size of its balance sheet by buying domestic assets, it has retained more room to pursue, if needed, a more expansionary monetary policy than is available at present to many central banks of other advanced economies.” More informationBulletin: Reflections on the Reserve Bank of New Zealand’s Monetary Policy Round
| A RBNZ release || July 28, 2017 |||
Azelis has acquired Chemcolour, a leading supplier of specialty chemicals and food ingredients in Australia and New Zealand, for an undisclosed sum.
The acquisition strengthens Azelis’ presence in the region and positions it among the top distributors in the two countries. Australia and New Zealand are wealthy countries, rich in natural resources with growing populations, said Azelis’ CEO, Hans Joachim Müller, adding that Chemcolour is a great platform to extend agreements with its existing, global principal suppliers.
Chemcolour Australia has a manufacturing plant in Sydney and application and development laboratories in both Sydney and Melbourne. The New Zealand business has its primary manufacturing facility in Auckland with secondary blending facilities in Christchurch. The distributor also performs contract manufacture for several well known companies.
The transaction is expected to complete over the next months. All 90 of Chemcolour’s employees will transfer to Azelis.
| An Azaris release || July 28, 2017 |||
As it prepares to launch international services from Apia to Auckland and Sydney, Samoa’s new international airline, Samoa Airways, has signed a Memorandum of Understanding (MOU) with Fiji Airways writes Peter Needham for eGlobal Media.
Under the MOU, the airlines will jointly pursue commercial opportunities and partnerships. Fiji Airways will provide initial support – through its established infrastructure in sales, commercial, operations and maintenance – to help launch Samoa Airways’ international services.
“We are happy to play a support role to help reboot Samoa’s international airline”, Fiji Airways’ managing director and chief executive, Andre Viljoen, said.http://travelindustryexpo.com.au/?utm_source=Global%20Travel%20Media&utm_medium=Banners
Samoan Prime Minister, Tuilaepa Sailele Malielegaoi, said Samoa’s decision to pursue a commercial partnership with Fiji Airways was driven mainly by the critical need to look beyond New Zealand and Australia and open Samoa up to the world. This would be done through Fiji Airways’ long-haul network, which includes direct flights from Los Angeles, San Francisco, Hong Kong, Singapore into Nadi.
Chairman of Polynesian Airlines, Feesago Siaosi Fepuleai, confirmed that with the signing of the MOU, separate commercial and operations agreements would be negotiated between the two airlines which would form part of the overall Pacific Partnership Alliance Agreement between Samoa Airways and Fiji Airways.
“The MOU we signed today gives both airlines a broad and strategic framework of how the Pacific Partnership will be negotiated and finalised”, Feesago stated.
“Under the MOU, there will be specific routes like Samoa to New Zealand and Australia that will be solely managed by Samoa Airways and other routes where both Airlines will jointly manage through codesharing and interlining.”
| An eGlobal Media release || July 28, 2017 |||
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JOB VACANCIES
Ξ Chief Executive - Farra Engineering Dunedin based - diverse engineering business
Today’s announcement of adjustments to the proposed changes in the Essential Skills visa are welcome news to manufacturers who continue to face skill shortages that hold back their businesses from expanding, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive, Dieter Adam said, “Despite these changes appearing to be coming from pressure largely from low-wage and primary areas of the economy, they do address some concerns manufacturers had.
“With the adjustments to the medium skilled salary threshold, the majority of skill shortages felt in the manufacturing industry will now be covered as medium skilled. This will help alleviate some of the perceived issues with the previous proposals, especially the 12 month stand down period after 3 years in the low skilled category.
“Some issues still remain, such as how setting one rate for all parts of the economy will affect the regions.
“While immigration continues to be discussed, we need to keep in mind the core need to create a system where we get the right type of skilled immigration into New Zealand. We need to address the skill shortages that hold our manufacturers and productive businesses back from expanding and contributing to higher exports and incomes.
“We recognise the growing concerns that the rapid recent increases in overall net migration have given rise to. The vast majority of those increases, however, are in migrant categories other than work visas for medium and highly-skilled workers. Any reduction in those categories would result in stifling growth in the productive high-value industries that employ such workers, including manufacturing.
“Student work visa and lower-skilled migration predominantly supplies workers to the lower-paid and low-value sectors like tourism and related hospitality industries. As Sir Paul Callaghan taught us, we need to steer our economy to where high-value and complex productive growth leads the way – increasing GDP per capita is a core path to prosperity for all in New Zealand. Part of achieving this requires ensuring we have the skills and talent such industries need to grow and innovate, through improving our education system to train New Zealanders and having effective immigration settings.
“Continually relying on growth of low-value industries for our future can actually take us backwards on this pathway to creating wealth, higher incomes and GDP per capita growth. Manufacturing and our high-value productive industries, on the other hand, have the potential to lead the way in this area. ” Said Dieter.
| An NZMEA release || July 27, 2017 |||
The Productivity Commission has released an issues paper calling for submissions to its inquiry into state sector productivity.
"State sector productivity matters because it tells us how many public services are delivered for the government’s investment in them. That might sound simple, but measuring government productivity is notoriously difficult," says Inquiry Director, Judy Kavanagh.
The Government has asked the Commission to investigate how to improve measurement of state sector productivity in the health, education, justice and social development sectors.
Ms Kavanagh says the inquiry process will also investigate what capability, culture and systems are necessary to support government agencies to better measure, understand and improve productivity.
"We know that performance measurement frameworks exist across all core agencies. The Commission is interested in what is currently in place, what works well, and what measures can be used to improve productivity and efficiency."
Ms Kavanagh says the success of the inquiry will rely on the input, knowledge and advice of the sectors concerned. "This issues paper raises a number of technical questions about measuring productivity in core public services. We’re looking for submissions from anyone with an interest in how public sector productivity is measured, and how productivity improvement can be supported."
The issues paper is now available at www.productivity.govt.nz and anyone interested in the topic can subscribe to receive regular updates. Submissions on the inquiry are due by 8 September 2017. The Productivity Commission’s final report to the Government is due on 30 August 2018.
For further information see the state sector productivity inquiry page, or email This email address is being protected from spambots. You need JavaScript enabled to view it. or call Robyn Sadlier on 04 903 5167.
| A Productivity Commission release || July 27, 2017 |||
Palace of the Alhambra, Spain
By: Charles Nathaniel Worsley (1862-1923)
From the collection of Sir Heaton Rhodes
Oil on canvas - 118cm x 162cm
Valued $12,000 - $18,000
Offers invited over $9,000
Contact: Henry Newrick – (+64 ) 27 471 2242
Mount Egmont with Lake
By: John Philemon Backhouse (1845-1908)
Oil on Sea Shell - 13cm x 14cm
Valued $2,000-$3,000
Offers invited over $1,500
Contact: Henry Newrick – (+64 ) 27 471 2242