Democracy Under Pressure

Or, Killing The Messengers 22 May 2025

At the request of a number of my paid subscribers who think it important that I should release it I have today’s post free to read.

Professor Robert MacCulloch is a very bright guy. He holds the Matthew S. Abel Chair of Macroeconomics at Auckland University, has a PhD in Economics from Oxford University.and has been published in a number of prestigious journals including American Economic Review, Review of Economic Studies, Review of Economics and Statistics, Journal of Economic Perspectives and Brookings Papers in Economic Activity.

Through his blog Down To Earth Kiwi he has criticised the economic policies of both Labour and National led governments for at least the last 15 years, but has now stopped writing it because he says :

“National, Labour and Big Business NZ have begun to complain and threaten me at the highest levels about my writings. The game has become clear. Continue doing so and it will mean the end of your future in this country. DownToEarth.Kiwi has been told in no uncertain terms that for me, as principal writer, due to this commentary, I've been wiped for consideration from top public and private appointments.“

So, just like getting rid of the Public Journalism Fund in an effort to silence independent documentary makers like myself from criticising government policies, it appears the powers that be are now putting pressure on outspoken academics in an effort to avoid uncomfortable analysis and questions.

And what has Professor MacCulloch been writing that has upset the current administration so much ? Well, articles like the one he wrote on May the 8th this year and which I now quote in full, because while I don’t have the access into the inner sanctums of Cabinet or banking boardrooms to verify what he says , I do recognise his absolute right to voice his opinions, and I also believe that democracy is made stronger by fourth estate commentary and journalism that speaks uncomfortable truths to power.

“ Incriminating evidence now points to Finance Minister Willis forcing out Governor Orr to take over the Reserve Bank of NZ on behalf of the Big Banks

What on earth has Finance Minister Willis been up to? Secret meetings. An unexplained resignation. Refusals to talk to the media regards the former Reserve Bank Governor's departure. A sudden, unexpected review of (Big) Bank Capital Requirements with the (hidden agenda) aim of loosening them, to be completed under urgency to prevent a future Governor from undoing that decision. The only way to explain Willis' erratic behavior is that she's doing the bidding of the big monopolies running rampant in NZ which are responsible for our ultra high cost of living. Rumors are swirling over former Governor Orr's departure. It may all end up in the courts on the grounds of his wrongful (constructive) dismissal by the Finance Minister. The following observations make her look as guilty as sin in our view:

The Reserve Bank had already settled on its new regime of Bank Capital Requirements. There was no need to review them, as Willis ordered, though won't admit. They've already been reviewed. They make sense to most eminent economists in the world who I have now checked with. But the NZ Big Banks say they are restricting lending & putting up rates. What did arguably the most famous Central Bank Governor ever, Paul Volcker, say about such claims? "The banks will claim they will restrict credit and harm the economy. It’s all bullshit".

The Big Banks have been lobbying the Finance Minister hard. Those Banks are members of the NZ Initiative, which is standing against the Capital Requirements. The Initiative writes, "The consequences of the high capital ratios deterring lending are of concern enough .. It is not just bank customers who suffer. So does the economy". Not true. As US Senator Brown & leading Stanford Finance Professor Admati note, “Absolutely nothing in these [Bank Capital Requirements] stops banks from making loans. Instead, they simply require banks to rely more on their own equity and less on borrowing to finance loans & investments".

Finance Minister Willis was a Director of the NZ Initiative. The Prime Minister and Willis' Chief Economic Adviser was Senior Economist at the Initiative. When attending meetings there on behalf of a former member, I used to see the PM, who was CEO of Air NZ. Last year the Initiative wrote a letter to Willis alleging that Governor Orr had breached the Code of Conduct relating to his response to the Initiative's critiques about the Capital Requirements. Willis took up the Initiative's complaint with the Reserve Bank's Chair, Neil Quigley. Disturbingly, Bloomberg News are reporting that they have documents showing that Finance Minister Willis asked the Treasury for advice on whether she had powers to direct the Reserve Bank to change its prudential policies. Her office asked several times for a meeting which Governor Orr refused. They ultimately agreed to meet on February 24, after the Bank's Monetary Policy Statement was released and just before Orr's abrupt resignation. Willis told her press team to keep the purpose of that February meeting a secret.

Both the Reserve Bank Chair and current Governor have a monetary conflict of interest in trying to resist Finance Minister Willis' demand that the Bank Capital Requirements be relaxed. The RBNZ Chair is asking Willis for up to 1/4 of a billion dollars and approval of a new Medical School at his University of which he is Vice Chancellor. As for the Governor, he is only temporary and needs Willis to approve his continuation to a permanent position in six months time, a promotion in terms of life-time future income and status worth millions.

This week current Reserve Bank Governor Hawkesby stated he wanted the second review of the Bank Capital Requirements to be completed super fast before the end of the year. No doubt he wants it finished whilst his current six month term as stand-in Governor is still running so he can give the Finance Minister the answer she wants to hear, in expectation his Governor job will be renewed (and he will be granted a full five year contract).

The Big Aussie Banks are already amongst the most profitable in the entire world, and make a dis-proportionate amount of that money out of Kiwis.

It is impossible to draw any other conclusion that the NZ Finance Minister is acting to implement the agenda of the Big Bank lobby. What is her motivation? Her former boss, Sir John Key, was Chairman of ANZ Bank. One can only expect it may be a job that she also covets when she retires from politics.

This saga has descended into such murky depths that DownToEarth.Kiwi has withdrawn any of the support we once had for Finance Minister Willis. We've no interest in playing partisan politics. We call out foul play where we see it. The great strength of NZ was meant to be the integrity of our public officials. Anyone playing dirty games that undermine the single most important financial institution in the country, namely the Reserve Bank, for their own wrongly construed agenda - or even worse, for their own personal gain - cannot endure in politics. Nothing our Finance Minister says about economics makes sense to me. Her budgets that do nothing to address NZ's long-run fiscal problems from an ageing population. The ferries. Her lack of action on the Big Banks, Big Supermarkets, Air NZ, Big Construction firms. It only can be understood in terms of back-room deals responding to lobbying from Big Business.”

I am sorry to see your blog closing Prof MacCulloch.

I hope you will find other ways to use your voice.

We need it.

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