After today’s discussion on food prices, it was interesting to see a speech out of the Reserve Bank.
The speech was painting risks – so stating things that could occur that were both positive and negative (risks are not just negative things when your current forecasts “balance” risks). It was good, it raised issues, and it gave me an idea for a post for next week.
But, who the hell picked the wording on this:
New Zealand farmers are still recovering from the last commodity boom
And I suppose employees are still recovering from the large increase in wages during 2007, and oil drillers are still recovering from the record high oil prices in 2008 …
Yes, farmers overborrowed, sure. But it wasn’t so much the commodity boom that did it – rather the expectation that land values and high commodity prices would make highly leveraged farm buyouts economical … when some were not.
I imagine farmers are really still recovering from the commodity slump during the GFC, weakened access to credit, and a sharp decline in farm values. The statement “recovery from” is not the first thing that comes to mind when thinking of a period when incomes were high
… You might think picking up on this is pedantic – but seriously, the wording the Bank uses is analysed in detail. And statements are constantly compared to try and get a feeling for where policy is moving. Saying that farmers are recovering from a period of high income gives the impression that they expect farmers to expose themselves again if commodity prices stay high – which is a big call.
I can (and constantly do) mis-speak, because I am not important. The Bank is important – it sets policy – and the train of thought that is betrayed by their language dictates how the market forms expectations of their policy