Three months ago I wrote a short post here using some new data the Reserve Bank had started to publish on the monthly payments Treasury was making to the Reserve Bank as the losses were gradually realised on the huge portfolio of bonds the Bank and MPC had run up in 2020 and 2021 (the LSAP). It was to the Bank’s credit that they have started making the data available, and although there have been a few glitches since then, when I have got in touch they have been very helpful.
I can remember the days when I and a few others used to jeer at them for having lost $7 billion (and these numbers are a proxy – albeit an imperfect one – for big and very real losses for the taxpayer from the asset swap programme, executed at probably the single most inopportune time since interest rates were liberalised 40 years ago). Last year, the Taxpayers’ Union gave the Governor a lifetime achievement award for waste, citing then estimates of $8.5 billion of losses.
That was then. When I ran the first post in May total RB losses (now properly measured, with the indemnity payment data) had been bobbling just either side of $10 billion. With today’s update by the Bank of the relevant spreadsheet, here is the position to the end of July.
Yes, total RB losses from this grossly overblown under-analysed programme have now reached $11 billion (which was also the last total estimate from The Treasury I’d seen).
But, again, that was then, and in August to date bond yields appear to have risen another 20 basis points or so. As the portfolio slowly shrinks and the longest bonds are sold off first, the extent of further losses should diminish, but there is no sign we’ve yet reached the limit.
I’ve tended to focus in on the Governor as responsible, and there is little doubt that he is the dominant figure on the MPC.
But we shouldn’t forget the other internal MPC members who shared in the decisions to accumulate the risk:
Then Deputy Governor, Geoff Bascand
Then Assistant (now Deputy) Governor, Christian Hawkesby
Then Chief Economist, Yuong Ha
One has since been promoted and two have moved on, although with no hint that sharing responsibility for absolutely huge taxpayer losses was a part of either move.
More recently, Karen Silk and Paul Conway have joined the MPC. They weren’t there when the risk was taken on, but they have been part of the decision not to close it out quickly, and thus to continue to expose taxpayers to further losses.
And then of course, there are the three externals, all reappointed since the LSAP folly: Bob Buckle, Peter Harris, and Caroline Saunders.
And who reappointed them and Orr? Well, that would be the Minister of Finance and the Bank’s Board, the latter chaired by Neil Quigley, who has just proved you can apparently just make up stuff to Treasury, lead Treasury to lie to the press, and still carry right on as chair of a government board. In this country new depths of poor governance seem to be plumbed almost every week.
Finally, we shouldn’t completely exclude the Secretary to the Treasury from responsibility. She sits as a non-voting member of the MPC and she advises the Minister on things like indemnities and Bank performance. There is not even a hint (eg in the MPC minutes or OIAed papers) that she has ever dissented from the highly risky and costly LSAP intervention.
That is quite a list of people who share responsibility for losses that have now reached $2000 per man, woman and child in this country. Readers will reflect on just what nice-to-haves that politicians are now competing to bribe us with (with borrowed money) might have been considerably more affordable had the Bank stuck to the OCR which, boring as it may be, tends not to make or lose taxpayers much money at all.
I suppose one way of looking at that list of the responsible men and women is that if we averaged it out, the loss was a bit under $1 billion per responsible public figure. There wasn’t even a good party (as Mr Leauanae enjoyed on leaving MPP) just reckless waste and losses on a scale not seen in New Zealand public finances for a very long time.
And no one paid any personal price. There was no personal accountability at all. Most of these people still hold their high, and highly paid, offices. While you and I are covering the losses they so carelessly racked up. It is some slim consolation that one of them is up for election in a few weeks.
