NewsroomPlus.com BERL chief economist Ganesh Nana’s overriding message at an economic briefing this morning could be characterised as ‘Keep Calm, But Don’t Carry On’. First, the ‘Keep Calm’ part. Invites to the event had posed three pairs of questions. The first pair was: Are we into a normal cyclical slowdown in growth? Or, do we have to dust off the ‘R’ word? In his economist’s “reading of the tea leaves” Dr Nana’s assessment is a firm YES to a forecast of a cyclical slowdown, and a firm NO to conflating current economic conditions that are admittedly “radically different from that expected just 6 months ago” as a crisis. To use a line from his media statement: “We knew commodity prices were going to adjust downwards, we knew the exchange rate was overvalued for a long time, and we knew the Christchurch rebuild was going to peak. Now these things are happening there is an adjustment occurring. We shouldn’t be too surprised by this (or that) there is more to come”. The ‘Don’t Carry On’ part was Dr Nana’s broad-ranging set of cautions and risk identification against certain attitudes and actions that policy officials, businesses and commentators might be, or are, tempted to have or take, but need to be dissuaded against having or taking. In a proximate way he cautioned against a number of attitudes and actions that would carry on unhelpful behaviour. Which can be listed like this:
- Don’t Carry On being obsessed with inflation when “inflation targeting misses the point” and distracts you to take your eyes off the ball – directed at the Government and officials .
- Don’t Carry On “getting cold feet from seeing ghosts from inflation past and so not (further) reducing the OCR” and thus putting “the necessary NZ$ exchange rate adjustment” at risk of stalling – directed at the Reserve Bank .
- Don’t Carry On “talking ourselves into a downturn” by losing confidence and “causing sentiment to impact on investment and employment and also potentially slowing the stimulus from the migration inflow” – directed mostly at businesses .
- Don’t Carry On “be(ing) driven just by the financial and money market commentators” – partially directed at financial and money market commentators. [Coupled with a wish that the ‘gap’ between the speculative economy (sharemarkets and their indices) and real economy (GDP) might be narrowed some day] .
- Don’t Carry On expending too much focus on Government accounts and notions of a surplus when that’s a “non story”, or inflation when that’s “yesterday’s story”, or other distractions – directed indirectly at other political parties, journalists, wider public