How a bird inspired the Reserve Bank’s approach to COVID-19
Unlike this year, with a strong economy and low unemployment pushing up wages but also inflation, any risks the RBNZ could see in March 2020 were “heavily biased in one direction … biased downward”. So he decided to take a ‘lest regrets’ approach – doing everything possible to ensure that his goals are met.
“In Maori culture, there are two whakataukī (proverbs) involving kōtuku that capture this trait of responding to the environment around you,” Hawkesby said.
“The saying ‘he kōtuku rerenga tahi’ loosely translates to ‘the flight of a white heron is seen only once.’ This whakataukī expresses an idea that ‘when ready, open your wings and engage to fly’.
“Apply this to the protocols of a marae (meeting house), it is used as a reminder that when there is the opportunity to speak, you may only have one chance, so you have to take your chance. and be bold. “
On monetary policy, Hawkesby said the path of least regret was to “act quickly and take big steps to build confidence that the policy parameters will be appropriate if the risks to the outlook materialize.”
But maybe it’s time to turn to a different whakataukī, said Hawkesby.
“The saying ‘tapuwae kōtuku’ roughly translates to ‘planned steps’ when you assess the environment around you. how the economy is likely to evolve.
“This is consistent with the observation that when there is a typical amount of uncertainty and risks are balanced, central banks overall tend to follow a smooth path and keep their policy rate unchanged or move incrementally. 25 basis points. “
That was the plan last month, before the current outbreak. Hawkesby said the RBNZ still sees reducing stimulus measures as the new path of least regret, with house prices “unsustainable relative to their fundamental drivers” and “lingering inflationary pressures” for the medium term to come.