How much should the Reserve Bank care about jobs?

As the RBNZ awaits labour market figures that will decide its next OCR move, the new government is rethinking employment’s role in New Zealand's monetary policy.

Mōrena, and welcome to The Bulletin for Monday, October 30, by Catherine McGregor. Presented in partnership with Z Energy.

In today’s edition: Town hall money pit will hurt other projects, admit Wellington councillors; Worldwide protests for ceasefire take place as Gaza communication blackout eases; Recommended reads on New Zealand’s World Cup loss. But first, has the central bank’s dual mandate had its day?

All hold for the latest labour market news 

After the Reserve Bank chose to keep interest rates steady at its last review, all economic signs currently point to more of the same next time. One thing that could change its mind on keeping them on hold? A “nasty surprise” in Wednesday’s labour market figures, says David Chaplin on Interest.co.nz. RBNZ is forecasting a slight rise in unemployment to 3.8% from its current level of 3.6%, and annual growth in hourly private sector wages of 7.1%, from 7.7% last quarter – a “nasty surprise” in this context would be the unemployment figure actually going down and hourly wages actually going up. As long as the Stats NZ figures show a significant weakening in the labour market, “the chances remain fairly good that we have seen the last of the OCR hikes, and therefore next year will become a story of when we can expect to see interest rates come down”, Chaplin writes. The next OCR review is on November 29.

Seymour calls for an end to RBNZ’s employment target – and a lot more

The figures will land amid a debate over the role of the RBNZ prompted by Act leader David Seymour’s call for sweeping changes to the central bank with the aim of making it more accountable to the government. Seymour told Jenée Tibshraeny (paywalled) he wants to do this by severely curtailing the bank’s powers – specifically by axing the Monetary Policy Committee (MPC), lowering the RBNZ’s inflation target and reducing the flexibility it has around how quickly it meets this target. While both Act and National have said they want to scrap the RBNZ’s employment target, Seymour’s plan is a lot more extreme than his coalition partner’s. In the Herald on Sunday (paywalled), Liam Dann wrote that such a laser-sharp focus on cutting inflation at any price would be a mistake. “Inflation is bad and we need to get it back under control. But we shouldn’t forget that high unemployment is often worse.”

How much does the dual mandate really matter?

Scrapping the Reserve Bank’s “dual mandate” to address both inflation and employment is a key plank of National’s 100 day action plan, suggesting the party believes the “maximum sustainable employment” objective has significantly detracted from its focus on keeping the lid on inflation. Writing in BusinessDesk (paywalled) a few days after the election, David Chaplin questioned that assumption, arguing that the additional requirement “doesn’t seem to have made much difference, aside from some extra comms work” and so scrapping it wouldn’t be a game-changer – “or at least one worth pursuing for the 100-day march”. Tibshraeny notes that Winston Peters may also have a bone to pick with the policy, having been part of the government that introduced the dual mandate back in 2019. He’s been an enthusiastic supporter of expanding the RBNZ’s focus since at least 2012, when he introduced a members’ bill “aimed at requiring the bank to also consider economic growth, export growth, the value of the dollar, and employment”.

Challenges ahead for National’s 100-day plan

What to do with the Reserve Bank is just one of the headaches for National as they gear up to deliver on their 100-day plan. The first challenge? Getting all the new laws written, says Vernon Small (the Sunday Star-Times, paywalled), who observes that “accurate law drafting can take immense amounts of time and there is limited capacity in the Parliamentary Counsel Office that does it.” For the public service, which is key to providing policy advice and support to new ministers, it’ll be an especially stressful time as they try to find “huge cost savings while facing thousands of job cuts – job cuts ordered by the very ministers asking for the urgent work”. Small thinks the reinstatement of the Resource Management Act will be relatively simple – other promises, like the justice law reforms, will be far harder to get done in the 100-day timeframe.

A message from Spinoff editor Madeleine Chapman

Thanks to the generous support of Spinoff Members, we were able to cover this election more expansively than ever before with writers reporting from Dunedin, Christchurch, Wellington, New Plymouth, Wairarapa, Gisborne, Auckland and Northland. With the results in, we will continue to interrogate and report on those who lead this country with rigour, range and humour. If you value The Spinoff’s political coverage, now is a great time to join the thousands of people who support The Spinoff by becoming a member or making a donation.

- Madeleine Chapman, Spinoff editor

Town hall money pit will hurt other projects – councillors

Wellington’s $147m town hall blowout could mean the axing, scaling back or delay of a number of council projects including a planned new park at Lyall Bay, the full rollout of cycleways and the Golden Mile revamp, The Post’s Tom Hunt reports (paywalled). The fallout comes amid an internal spat over who knew what when regarding the town hall cost overrun, with some councillors saying they’ve known of the issue since March while others saying they only found out this month. “The timing is crucial because between May and October, the council voted on a number of big projects including spending tens of millions of dollars on the Golden Mile and Thorndon Quay, signing a contract for a $370m sludge plant, and agreeing to $7.1m on a playground at Frank Kitts Park,” Hunt writes. 

Worldwide protests for ceasefire as Gaza communication blackout eases

Hundreds of thousands of demonstrators marched in cities across Europe, the Middle East and Asia over the weekend in support of the Palestinians, as Israel's military stepped up its air and ground offensive in Gaza. Around 100,000 rallied in central London, with smaller marches in cities including Auckland, where thousands turned out to call for an immediate ceasefire. In Gaza, telephone and internet communications were partially restored after an extended blackout that had badly impacted rescue operations. Meanwhile, with supplies of food, water and medicines running low and much of Gaza reduced to rubble, thousands of residents broke into warehouses and distribution centres of the United Nations Palestinian refugee agency (UNRWA) grabbing flour and "basic survival items", Reuters reports. 

Michael Donaldson on the golden age of newspapers and building a new print career in craft beer

In the new episode of The Fold, Duncan Greive is joined by the editor of Pursuit of Hoppiness to discuss sports journalism, print media and craft beer.

Recommended reads on New Zealand’s World Cup loss

“Emotion, ferocity, heart, passion. It was all there in the form of the true star of the 2023 big dance, rising to the occasion, defying gravity, fearless, formidable: The Whistle.” So writes Toby Manhire in his tribute to the undisputed star of yesterday’s final. Dylan Cleaver also has a good read on the The Spinoff this morning, republished from his newsletter The Bounce. It’s both an analysis of the game as a whole and a rant about the scourge of the TMO: “The idea that these real-time collisions need to be slowed down and exhaustively analysed to ensure they’re flawless is the fundamental problem of modern rugby.” Also recommended: RNZ’s Jamie Wall who says the game “mostly resembled a serious street fight” and Paul Lewis in the Herald (paywalled), who argues South Africa are “better at not playing rugby than the All Blacks are at playing rugby”.

Click and Collect

• The top of the North Island has a dreadful week of weather ahead, while Wellington and the South Island are going to be basking in sunshine. 

• Half of all cardiac patients waited longer than the maximum time frame considered appropriate by their specialists (the Herald, paywalled)

• “The sarcastic soul of Friends”: Rolling Stone’s Alan Seppinwall pays tribute to the wry comic genius of the late Matthew Perry.

• Poet essa may ranapiri has won the inaugural Keri Hulme Award for Māori writers.

Right now on The Spinoff

Labour’s next big task is finding its policy again, says Max Rashbrooke. Camera-shy books editor Claire Mabey talks to Ebony Lamb, acclaimed musician and creator of the best author portraits around. Gemma Bowker-Wright pays tribute to the healthcare workers who saved her son’s life. Alex Casey reviews Taylor Swift’s Eras tour, the movie. Charlotte Muru-Lanning meets the couple behind a new Sāmoan fine dining restaurant in Auckland.

Sporting snippets

• Eddie Jones has resigned as Australia coach in the wake of the team’s calamitous World Cup campaign.

• “India stayed perfect and England remained awful” with Mohammed Shami bowling a stunning opening spell to give the hosts a 100-run win at the Cricket World Cup.

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

If you liked what you read today, share The Bulletin with friends, family and colleagues.