Greens, National, ACT and former Reserve Bank chairman call for major COVID-19 inquiry
It was the dawn of an unprecedented time and required unprecedented spending: lockdown was needed to stop COVID.
“The worst-case scenario is simply intolerable,” Prime Minister Jacinda Ardern said in March 2020 as New Zealand’s first lockdown loomed.
To keep Kiwis working, the COVID cash floodgates have opened for the wage subsidy and business support. Meanwhile, to keep Kiwis spending and borrowing, the Reserve Bank cut interest rates and pumped out money.
“While they started out with the right intentions and probably the right policies, they didn’t think enough about the impact of their actions on inflation,” former Reserve Bank chairman Arthur Grimes told Reuters. Newshub Thursday.
To get an idea of the seismic stimulus quantity, here it is with all the zeros: $58,400,000,000 from the COVID Response and Recovery Fund, and the Reserve Bank basically printed $54,000,000,000.
Grimes said the answer was overcooked.
“The Reserve Bank kept accelerating until the red light came on saying, oops, inflation is a huge problem now, it’s too late to react,” Grimes said.
He argues that the Reserve Bank printed too much money for too long and should have raised interest rates sooner.
“Once you see the whites of the eye of inflation, it’s too late,” Grimes said.
The injection of cash into the economy has also caused the prices of assets, such as houses, to skyrocket.
Average house price growth in all OECD countries was slightly above 10%. But by the end of 2021, homes here in New Zealand had risen by almost 30% – more than any other country.
Compare that to Mexico, which had the lowest growth between Q4 2019 and Q3 2021 at 1.7%, or countries like the UK (8.3%), the US (20.2%) and Australia (20.8%). percent). The OECD reports that prices would have risen 10% here if the pandemic had not happened.