In releasing its latest quarterly assessment of prospects for the New Zealand economy, independent forecasters BERL highlight the need to revisit New Zealand’s policy thinking.
“It is more than two and a half years since the IMF published its ‘Rethinking Macroeconomic Policy’ discussion note in February 2010. Might it not be time for New Zealand to take the hint and rethink its own macroeconomic policy?” questions BERL Chief Economist Dr Ganesh Nana.
Business and political leaders, officials and policy makers alike need to approach macroeconomic policy in the new, post-2008, world with an open mind.
“If it’s good enough for the IMF to think again, then it should also be good for New Zealand to at least attempt to have an informed dialogue.
“Immediately labelling suggestions as ‘wacky’ or ‘stunts’ is not conducive to informed debate, as recent international experience has seen many options once viewed as heretical now returning to the conventional norm. We need a constructive and mature debate, where minds are not closed by the relics of past dogma,” Dr Nana commented.
BERL’s latest forecasts point to the prospect of deflation and the need for a fresh policy perspective given the dramatic changes in the world of economics and business.
In this environment, BERL questions the efficacy of the government’s single-minded quest for budget surplus in 2014/15, and the Reserve Bank’s inflation control policy target.
“With deleveraging continuing across the business and household sector, and little relief from external demand, is now really an appropriate time for the government to be so focussed on returning its accounts to surplus? And with inflation beneath the floor of the target band and an exchange rate above that consistent with external balance, should inflation targeting really serve as the cornerstone of our macroeconomic policy framework?” asks Dr Nana.