Harbour commentary: It is Not Just About Being a Hawk or a Dove

The most common guess had been that his time at the World Bank would for some reason make him even more dovish than Alan Bollard.  Our view had been that it was too early to judge, and that all we could tell was that he looked imminently qualified to bring strong academic and organisational leadership to the Reserve Bank.

Graeme Wheeler’s first Official Cash Rate (OCR) review yesterday provided very few clues as to whether he would be a hawk or a dove.  While keeping the OCR unchanged, the accompanying press release was even briefer than normal, leaving economists grappling for colour.  If anything, the market was surprised there wasn’t more emphasis on the recent soft patch of domestic economic data. 

This information void gave increased importance to the Governor’s first speech today on “Central Banking in a post-crisis world”.

He used this opportunity to remind readers that monetary policy by itself cannot deliver quick fixes to achieve everything to everyone.  He highlighted that the growth rate of an economy is ultimately driven by the mix of its resources and how productively they are applied to add value and generate wealth.  Equally, the exchange rate of an economy is ultimately driven by the savings and investment habits, not short-term interventions.