Thursday, 9 February 2017

Bits and bobs from the Bank

We all know the big news from today's Monetary Policy Statement - the official cash rate stays on hold, as unanimously expected by the forecasting community, and, assuming the world pans out the RBNZ thinks it will, an eventual rate rise is a bit closer than before.

But there's always less important, but still interesting, stuff to be found in the nooks and crannies of the MPS and in the Governor's 10.00am press conference afterwards.

Here's one thing worth noting from the MPS, as a corrective to anyone who thinks our big rise in net immigration is mainly or wholly because we're being swamped by Asians.


In 2012, we had essentially a breakeven net immigration position (for the record, a small loss of 1,165 people). Since then net immigration has soared to last year's net intake of 70,588. That's a turnaround of 71,753. By far the biggest moving part in the turnaround isn't Asian at all. It's what has happened trans-Tasman, Over the same period, fewer Kiwis decided to go to Australia, and more Kiwis (and some Aussies) decided to come here, as our economic cycle picked up and theirs slowed down. As a result we moved from a net loss to Australia of 38,796 people in 2012 to a small net gain of 1,563 in 2016, a turnaround of 40,359. That's 56% of everything right there.

From the press conference, John McDermott, the Bank's Head of Economics, picked up on a question from the NBR's Rob Hosking, who had asked about the multiple references to 'uncertainty' of one kind or another, and said we should all have a look at "Nick Bloom's website".

This is what (I reckon) he meant - the Economic Policy Uncertainty website, which has some wonderful indices measuring the level of economic policy uncertainty in various economies, and globally. Here's the latest global picture, as at November 2016. No wonder people are talking about high levels of uncertainty: while the index hasn't been going forever (it starts in 1997), current global policy uncertainty is at an all-time high for the period.


Fascinating site - you can read their methodology, and download the data for quite a range of countries (sadly not including us). But the Aussies are there: here's what they look like.


And finally there was a casual reference from the Governor, responding to a question about the future track of interest rates, where he said that in the November MPS, there had been a 20% probability of an OCR cut built into the OCR forecast, but it has now been removed in this latest one.

I don't recall ever reading (or hearing) about these probabilities before. I don't have a problem with them - they would seem to be an eminently reasonable way of thinking about things - but if they are indeed an established part of the policy thinking, I'd quite like to have more detail at future Statements. Central banks seem quite comfortable these days indicating an easing or a tightening bias: sharing some probabilities around it wouldn't go amiss.

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