Greens, National, ACT, former Reserve Bank chairman call for major COVID-19 inquiry

The Greens, National, ACT, and an ex-Reserve Bank chairman are all on the same side - calling for an inquiry into the economic response to COVID-19.

They say inflation and increased inequality are a result of the Government's COVID cash and the Reserve Bank's money printing.

It was the dawn of unprecedented times and required unprecedented spending: A lockdown was needed to shut down COVID.

"The worst-case scenario is simply intolerable," said Prime Minister Jacinda Ardern in March 2020, as New Zealand's first lockdown loomed. 

To keep Kiwis working, the COVID cash floodgates opened for the wage subsidy and business support. Meanwhile, to keep Kiwis spending and borrowing, the Reserve Bank slashed interest rates and pumped out cash.

"While they started out with the right intentions and probably the right policies they didn't think far enough ahead as to what their actions would do to inflation," Arthur Grimes, a former Reserve Bank chairman, told Newshub on Thursday.

To get a sense of the seismic amount of stimulus, here it is with all the zeros: $58,400,000,000 from the COVID Response and Recovery Fund, and the Reserve Bank essentially printed $54,000,000,000.

Grimes said the response was overcooked.

"The Reserve Bank kept on accelerating right until the red light came up saying, whoops inflation's a huge problem now, it's too late to respond," said Grimes. 

He argues the Reserve Bank printed too much money for too long and should have hiked interest rates sooner.

"Once you see the white of the eyes of inflation it's too late," Grimes said. 

Pumping cash into the economy also led to skyrocketing increases in asset prices, like houses. 

The average house price growth across all OECD countries has been just over 10 percent. But towards the end of 2021, houses here in New Zealand had increased by almost 30 percent - more than any other country.

Compare that to Mexico, which had the lowest growth between the fourth quarter of 2019 and the third quarter of 2021 at 1.7 percent, or the likes of the United Kingdom (8.3 percent), the United States (20.2 percent), and Australia (20.8 percent). It's reported by the OECD that prices would have gone up 10 percent here if the pandemic didn't happen.

Greens, National, ACT, former Reserve Bank chairman call for major COVID-19 inquiry
Photo credit: OECD.

"Obviously, we've seen massive house price inflation, but on top of that, the deepening of inequality," said Green MP Chlöe Swarbrick.

Swarbrick has been asking for a Select Committee inquiry for five months, but every time Labour has used its majority to block it.

"The New Zealand public deserves transparency of understanding about what's happened in this once in a generation, completely unprecedented pandemic because we're still feeling the effects of it right now," she said. 

National has the Greens' back.

"New Zealanders are suffering every week and they need to know if mistakes were made that could be avoided in the future," said National's finance spokesperson Nicola Willis.

ACT leader David Seymour has long been calling for a Royal Commission of Inquiry into the COVID response. He said ACT also supports a Select Committee inquiry - if Labour would stop blocking it.

"I asked the Reserve Bank Governor about this back in the start of 2020. They have massively shattered the dreams of young New Zealanders who have seen their house prices get inflated further into the distance."

But Finance Minister Grant Robertson said there have been "numerous opportunities for Nicola Willis and other people to quiz both the Government and also officials throughout the COVID pandemic".

Grimes also wants more scrutiny of the Reserve Bank's actions

"How come so many of its senior staff have left in recent times?"

He wants to know whether the Reserve Bank's dual responsibility for keeping down inflation and unemployment influenced its decisions.

"They were solely focused on unemployment," Grimes said. 

In response to another criticism of the COVID-19 response, the Reserve Bank Governor Adrian Orr acknowledged the 7.3 percent inflation, saying "decisions over recent years have influenced this outcome".

Robertson said there will be a "time and a place" for an "overall lookback".

But Grimes said "things have gone wrong". 

"You won't want to leave that to a year or two down the track. You want to under cover now what's gone wrong and fix it."

An inquiry would give New Zealand a set of shared basic facts about the impacts of the COVID economic response. It would likely take a year, coming back right before the election. 

But kicking the can down the road risks making the question of an inquiry an election issue itself.