Video: Allan Bollard on his book "Crises"

Q+A: Interview with Reserve Bank Governor Alan Bollard…

Source: Q+A - See Interview Transcript Sunday September 05, 2010

Guyon Espiner interviews Reserve Bank Governor Alan Bollard.

I just wondered the merits or otherwise of a reserve Bank Governor who is supposed to show complete lack of bias one way or another to any Government then goes on to critique that Government while still in office over some of its policies in his new book Crisis: One Central Bank Governor and the Global Financial Collapse.

Should a Reserve Bank Governor wait until he leaves his position before writing a book on his time at the bank?

Absolutely he should.

In his book Alan Bollard talks about the the machinations behind what happened at the bank in October 2008 during the global financial crises in relation to his job and the liaison he had with the Labour Government at the time.

He is critical of Labour during the crises and the current Government for its jobs policies.

He seems to be quite candid with much of what he says in the book but at the same time says there are some details he has had to leave out.

Mr Bollard is entitled to an opinion but as Reserve Bank Governer we the people are not supposed to know the biases, political or otherwise, that he might have towards his employers lest we are able to figure out more easily his modus operandi for setting the official cash rate every few months.

Why have a Governer at all, why not let the market set the rate if he is going to spill hits guts in office.

Best to leave the book until retirement Alan and then perhaps you will be able to include all the stuff you left out.

Alan Bollard @ Share Iinvestor

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Alan Bollard Speaks, but who is listening?

He was wrong about hiking interest rates and he took far too long to drop them again. Now he needs to start raising interest rates but still no sign of that. Last year Alan Bollard, Reserve Bank Governor, also said the recession was over.

How can we then take seriously Bollard's claim made today that:

"New Zealand is likely to begin recovering from the global financial crisis ahead of the pack".

NZ Herald 14/07/09

I am not sure what he is pointing as to evidence of this rather bold claim but his track record is littered with inaccuracies and bumbling wrong moves with a penchant to be somewhat Schizoid.

Is this supposed to inspire confidence for the average kiwi?

The stockmarket didn't believe a word of his pronouncement, rising only a handful of points when the large DOW movement up overnight indicated there should have been a good rise on the NZX today.

More astounding and confusing remarks today from the Gov given his decree last year that the recession was over:

"We appear to have avoided a repeat of the Great Depression. After the plummet in activity through to early 2009, production seems to be stabilising (Europe), to have stabilised (USA) or even turned around (some Asian economies)." NZ Herald - 14/7/09

But didn't he say late last year that the recession was over while we were at the height of the US banking collapse and hasn't the recession continued until the present day?

Well, yes he did and it has:

However, Bollard indicated at a press conference today that he thought the recession in this country was already over.

"If you want to be technical about it we believe the recession has ended and we have positive but very low growth for the next four quarters. It's only towards the second half of next year that one can be sure that we're getting solid growth," he said. "Those numbers in New Zealand can jump around and historically they tend to improve rather than getting worse.

Bollard said the recession was actually quite shallow and a lot shallower than in the past.
Stuff.co.nz - 4/12/08

What the...?!

So if you cant decide from day to day how things were, are, or are going to be Mr Bollard then how are we expected to decide? It kinda makes you wonder of the relevancy of a Reserve Bank Governor in the first place.

Why not let the market decide what interest rates it wants, it would at least be more accurate and reflect market conditions far more competently than a soothsayer.

Best leave the fortune telling for the Woman's Day.


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Mr Conservative

Alan Bollard is inherently conservative and has only ever acted re-actively in his position as Reserve Bank Governor.

The current economic climate, unlike the weather, is melting down and this should lay heavy on his mind.

One might say that he saw all this turmoil coming and left himself alot of room to move interest rate downwards when really needed but I do not credit him with that much foresight-hey he works in a government department how talented can he be?

Like tax cuts, lower interest rates stimulate economic activity, simply because they leave more money in consumers pockets and even though inflation is supposed to be his only target wee Alan should have been cognisant of a failing economy for some time.

Economic pundits have dangled cuts of anything between 1-2% and I myself would contend that 2% would be the more appropriate figure, in fact I have argued for a year that he needed to move downwards.

Given Bollards track record of blind conservatism though it would be a surprise to the market if he picked a rate close to 2%.

I dont buy lotto tickets (I only in markets!) but I am going to stick my neck out and pick a 1.25% cut at 9.00am this morning (NZ Time)

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OCR cut puts pressure on investors seeking better returns

The OCR rate cut coming this Thursday varies from 1-1.5% depending on which financial media commentator you are following but what is clear is that this cut isn't going to immediately stimulate any sector of the economy because most people have put their wallet away thinking there are cheaper bargains to be had.

What it will do is put pressure on many who have money to invest to go out and find a better return than the gross 6% (and dropping) interest rate they maybe getting for a term investment and the meager real returns still to be found in residential real estate for rentals-values for that sector still have a long way to fall and then will become more attractive return-wise.

I would contend that there are many good stocks on New Zealand's NZX that will find an attractive home for the vast amount of billions currently tied up in term investments in our three major banks.

With a 1.5% point cut on December 4 the OCR rate would be 5% and another likely cut early in 2009 would see our OCR fall below 5% putting pressure on investors coming back from holiday to go hunting for better returns in the stockmarket.

Look for higher yielding and safer large capital stocks to benefit from rate cuts.

A dozen or more Kiwi stocks are paying more than a 10% gross yield and companies like Telecom NZ [TEL.NZ] should do well from those bailing out of banks.

Eventually the rate cuts will work to stimulate our economy, just as tax cuts do.

I am hoping against hope that since the previous Government has guaranteed finance companies that no more term deposit money goes after their higher rates.



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Alan Bollard's indecision over OCR a worry to NZ INC

The case for Alan Bollard, New Zealand's Reserve Bank governor, to lower interest rates is strong and the time to do it is clearly now.

His rationale and excuses for raising them over the last few years has been to keep inflation in check but he really is swimming up the creek without even a boat when he has had to contend with out of control government spending and more to come, record oil prices, an exchange rate that is at post float highs and a crises of credit flow and lack of faith in business and the global economy.

He had raised the rate, with one explicit goal in mind and after every rate rise he told us that kiwis really needed to "end their love affair" with real estate. Almost double figure mortgage rates have finally put paid to our love affair and some sellers are finding their divorce from excess rental investments becoming more hateful by the day.

Yes, the housing market is dropping like a cheap hookers knickers but it took more than two years lag for Bollard's aim to take effect.

That is my point. The effect of his rate manipulations, up or down, take time to infiltrate their way through the market. A rate cut one Thursday morning could take more than a year to have a consequence.

The time to cut our interest rates from the current official cash rate of 8.25% is now. A couple of .75 cuts in succession are needed immediately, and then 2 more .50 cuts after that, then smaller ones if needed.

The fact that Alan Bollard is sitting on his hands over this, just shows those who know a little about economics that he really doesn't know what to do. Like a possum in the headlights he is going to move when he has to, that is, when the shite hits the fan.

His upwards movement of the official cash rate has not only affected the housing market negatively it has also put business lending out of reach of many struggling and promising new growth businesses. With high CAPEX costs our economy is simply going to fold up and go somewhere else if the status quo continues.

While Bollard's high cash rate has clearly pushed up our currency against our big trading partners, as Mr and Mrs Uridashi take advantage and invest their Yen here, it has also squeezed margins for our exporters.

While this is a risk that New Zealand exporters need to manage and only a smaller consequence in my opinion, it really shouldn't be happening if the cash rate was managed properly.

In fact, a wise move would be to abandon the official cash rate and keep the machinations of hopeless bureaucrats like Bollard out of things he doesn't understand. Let the market decide its own cash rate, it would be more efficient, more predictable for those it has a direct affect on and allow flexibility and competition for our banking institutions.

Finally, moving the cash rate too low isn't enough to rescue our economy from the current downturn. Japan tried that in the 1990s and it failed miserably. We must also have large personal and business tax cuts. These would have the dual effect of stimulating our economy while also putting the brakes on wasteful government spending, when we most need it.

The headlights are getting closer Mr Bollard, lets hope you move before our economy is run over.


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Bollard sits on his hands

Alan Bollard rattled his sabre again last week.

Keeping the cash rate at 8.25% while telling us inflation was a risk down the road.

Well helloooo! could one of the reasons to the risk of inflation be your 4 rate hikes this year and multiple ones over the last few years?

The short answer is yes but the less interesting answer is that Bollard is clearly out of his depth.

Barely able to see over the rims of his accountant style glasses, he rarely has the vision to see further than what happens from day to day..

Instead of dropping the cash rate, as he should have, he risks putting the New Zealand economy at the sort of risk the Labour Government has put it under for the last 8 stifling years.

Labour did it with world record breaking high taxes, removing cash and investment from the economy and Bollard did it with the worlds highest interest rates outside the worlds other banana republics, ditto removing cash from street level and strangling productive investment, savings and business.

World economies are cutting rates to stimulate economies and Bollard sits on his hands. It looks like he will only move once the economic cycle we are in is in the middle of a meltdown.


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