Milton Friedman visited Australia in 1975. He spoke with government officials and appeared on the TV show Monday Conference. Apparently, that was enough for him to take over Australian monetary policy settings for this foreseeable future.
When working at the next desk to the monetary policy section in the late 1980s, I heard not a word of Friedman’s Svengali influence:
- The market determined interest rates, not the reserve bank was the mantra for several years. Joan Robinson would be proud that her 1975 visit was still holding the reins.
- Monetary policy was targeting the current account. Read Edwards’ bio of Keating and his extracts from very Keynesian treasury briefings to Keating signed by David Morgan that reminded me of macro101.
See Ed Nelson’s (2005) Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand who used contemporary news reports from 1970 to the early 1990s to uncover what was and was not ruling monetary policy. For example:
“As late as 1990, the governor of the Reserve Bank rejected central-bank inflation targeting as infeasible in Australia, and cited the need for other tools such as wages policy (AFR, October 18, 1990).”
Bernie Fraser was still sufficiently deprogrammed in 1993 to say that “…I am rather wary of inflation targets.” Easy to then announce one in the same speech when inflation was already 2-3%.
When as a commentator on a Treasury seminar paper in 1986, Peter Boxhall – fresh from the US and 1970s Chicago educated – suggested using monetary policy to reduce the inflation rate quickly to zero, David Morgan and Chris Higgins almost fell off their chairs. They had never heard of such radical ideas.
In their breathless protestations, neither were sufficiently in-tune with their Keynesian educations to remember the role of sticky wages or even the need for the monetary growth reductions to be gradual and, more importantly, credible as per Milton Freidman and as per Tom Sargent’s End of 4 big and two moderate inflations papers.
I was far too junior to point to this gap in their analytical memories about the role of sticky wages, and I was having far too much fun watching the intellectual cream of the Treasury senior management in full flight. At a much later meeting, another high flying deputy secretary was mystified as to why 18% mortgage rates were not reining in the current account in 1989.
Friedman’s Svengali influence did not extend to brainwashing in the monetarist creed that the lags on monetary policy were long and variable. The 1988 or 1989 budget papers put the lag on monetary policy at 1 year, which is short and rapier, if you ask me.
New work by Chris Ball and John Creedy shows substantial *declines* in NZ inequality.
You really are still fighting the 1990 New Zealand general election election if Max Rashbrooke makes more sense than you on the good old days before the virus of neoliberalism beset New Zealand from 1984 onwards.
Maybe 65% of the population of those good old days before the virus of neoliberalism. were missing out on that broadly egalitarian society championed by Bryan Bruce.
As is typical for the embittered left, the reactionary left, gender analysis and the sociology of race is not for their memories of their good old days. New Zealand has the smallest gender wage gap of any of the industrialised countries.
The 20 years of wage stagnation that proceeded the passage of the Employment Contracts Act and the wages boom also goes down the reactionary left memory hole.
That wage stagnation in New Zealand in the 1970s and early 80s coincided with a decline in the incomes of the top 10%. When their income share started growing again, so did the wages of everybody after 20 years of stagnation. The top 10% in New Zealand managed to restore their income share of the early 1970s and indeed the 1960s. That it is hardly the rich getting richer.