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RBNZ Dials Back Public Speaking Amid Housing vs Inflation Battle

BloombergBloomberg 22/06/2016 Matthew Brockett

 New Zealand’s central bank has reduced its public speaking as it battles the opposing forces of a housing boom and weak inflation.

The Reserve Bank has more than halved the number of on-the-record speeches it gives a year, from 18 in 2014 to eight last year and four so far in 2016. Of those, Governor Graeme Wheeler gave seven speeches in 2014, three in 2015 and one this year.

The reduction comes despite the bank’s stated aim to increase on-the-record communication. It also coincides with criticism of the bank’s messaging from some economists, who complained that Wheeler’s only speech this year steered them in the wrong direction on interest rates.

“Communication is one of the key tools that the Reserve Bank has available to it, and it is refusing to use it,” said Shamubeel Eaqub, former principal economist at the New Zealand Institute of Economic Research and now an independent economist and author. “Its communication has been ineffective, and it shows. If the Governor doesn’t talk to the media, how do you get your views out there?”

By comparison, Australia’s central bank has given an average of about 40 speeches a year over the past four years. Its policy makers have given 20 so far this year, four of which were delivered by Governor Glenn Stevens.

‘No Real Reason’

Asked about the decline in speech numbers, Wheeler said June 9 there was “no real reason for it.”

“We’ve got one or two coming up,” he said, adding that a business reporter had recently told him the speeches were too complicated, “so hopefully they get read.”

Speaking at the same news conference, Assistant Governor John McDermott said the number of bulletin articles, discussion papers and analytical notes published by the bank had “increased massively.”

“Communication is more than speeches,” RBNZ Head of Communications Mike Hannah said Wednesday. “Speeches will be made when we have things to say.”

The Animals

Wheeler gives six press conferences a year -- following monetary policy statements and financial stability reports -- and appears before parliament’s finance and expenditure select committee seven times.

In December 2013, the RBNZ said it had adapted its communications to recognize significant public interest in its policy settings, objectives, tools and governance.

RBNZ Deputy Governor Geoff Bascand said at the time that communication was critical to the bank’s success and “communicating on a broader front is one of our strategic priorities.”

Quoting from a song lyric by The Animals -- “I’m just a soul whose intentions are good, oh Lord please don’t let me be misunderstood” -- he said the bank had “expanded the number of on-the-record speeches” and would extend the 80 to 100 off-the-record briefings it gives annually to business groups “to achieve greater geographic representation and diversity of audience.”

The bank doubled the number of public speeches it gave in 2013, Wheeler’s first full year in office, to 16.

No Media

An unusual feature of the RBNZ’s on-the-record speeches is that, while media are provided with a text, they are not permitted to attend. The bank says this is to allow policy makers to speak freely and depart from script without fear of the comments being published and misinterpreted.

Central banks in Australia, Europe, the U.K., the U.S. and Japan allow media to attend public speeches.

“It is a concern if journalists are not given the opportunity to attend any speeches of the central bank governor,” said Petra Geraats, an economics lecturer and expert on central bank transparency at the University of Cambridge in the U.K. “It makes one wonder whether any significant, potentially market-sensitive, information was provided.”

Wheeler is navigating uncharted waters. He has cut his benchmark rate to a record-low 2.25 percent and signaled another reduction is likely needed to boost inflation back to the 2 percent midpoint of his 1-3 percent target range. Inflation has been below 1 percent for six straight quarters. At the same time, lower borrowing costs are fueling a housing boom that’s threatening financial stability.

More Uncertainty

The Bank of New Zealand published analysis this month showing financial markets have become less certain about what the RBNZ will do when it makes policy decisions. It looked at decisions since mid-2010 and concluded five of the last 42 have surprised markets. Of those, four occurred in the last year and three in the last six months.

While this partly reflects global uncertainty, “the RBNZ’s messaging has been somewhat off target” and “it must accept some responsibility,” BNZ Head of Research Stephen Toplis said in the analytical note.

“The most notable point of confusion was in March when the market had, largely as a consequence of the Governor’s February speech, decided that the RBNZ was on hold -– and then it cut,” he said.

Wheeler has rejected that criticism, saying a plunge in inflation expectations after the February speech changed the outlook for interest rates. At his June 9 press conference, he also took issue with the BNZ’s analysis, saying it compared several years of relative rate stability with the recent episode of change.

“Periods of changes bring surprises,” Wheeler said. “That’s true for every central bank making interest-rate decisions.”

To contact the reporter on this story: Matthew Brockett in Wellington at mbrockett1@bloomberg.net. To contact the editors responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net, Tracy Withers, Michael Heath

©2016 Bloomberg L.P.

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