I am surprised to see Bill English slam his former department – of course it is entirely likely that the newspaper is simply exaggerating his reaction to their briefing.
The core of Bill English’s criticism of Treasury appears to be that “they aren’t thinking of ways that fiscal policy could prevent the recession”. But maybe they believe that it is not the role of fiscal policy to stabilise activity while monetary policy still has plenty of bullets left?
If that is the case then their focus on the “medium term” makes sense – doesn’t it. Well not quite.
We still have the issue of distribution – a recession is especially painful because the loss is not spread evenly (or to be closer to correct, it is not spread in a way that appropriately associates the individuals cost of losing a job to the actual lose of a job – there is no “market price” for getting fired which can be used to ensure that those who value work at the highest rate keep their jobs!).
The cost of a “temporary slump in demand” is felt disproportionately by those who lose their jobs. As a result, there may be a role for government to re-distribute, in order to buffer the pain of the recession – even if they can’t prevent the recession.
Is that the type of plan Bill English wanted from them? I don’t know – I suppose things will become clearer as the briefings are made public.
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