Campaign to change monetary system receives ‘underwhelming response’ from Treasury

By Don Richards, Positive Money NZ

We received a response from the Petitions Committee in relation to our submission to have the Reserve Bank directly fund the Covid recovery and essential infrastructure.

The Petitions Committee response provided a good summary of our position and it constituted the bulk of their response.  They did not devote much space to the advice they received from Treasury which was an embarrassing indictment of Treasury’s tunnelled vision.

Despite the evidence provided in our submission Treasury said that our proposal “creates some risks with no obvious economic and balance sheet benefits”.

It goes on to say that our proposal would undermine the effectiveness of the Large Scale Asset Purchase (LSAP) programme as the aim of the programme was to reduce government bond interest rates.

We say that the Reserve Bank spent $53,000,000,000 to reduce interest ratesby less than 1%.  That is a monumental waste of money and the Treasury had the temerity to suggest that our proposal to spend the money on our covid 19 response and infrastructure “had no obvious economic benefit.”

Treasury went on to say that purchasing government bonds directly may undermine the objectives of having a deep and active market for Government debt and of lowering Crown financing costs by reducing price transparency, market efficiency, and the incentive on dealers to support the secondary market.

We say we do not want a deep and active market for Government debt.   We also do not want to provide dealers with an incentive to support the secondary market.  Rather than the dealers benefiting from the debt market, at the cost to future generations of kiwis, our government needs to directly fund our covid 19 recovery and infrastructure costs.

We believe an independent commission should investigate the LSAP programme which squandered a monumental sum, possibly the largest single public spending programme in New Zealand’s history. It requires proper public and parliamentary scrutiny which cannot be done by either the Reserve Bank or Treasury.

Here is a link to previous Positive Money newsletters.