by Ganesh Nana

Budget 2015 documents were accompanied by a banner heading A plan that's working. An undoubtedly naive economist, originally ignorant as to the presence of the plan, describes his journey in uncovering the nature of the plan.

Did you know we had a plan? And, did you know that it’s working?

Well, entering the Budget lock-up last week I was confronted on the screen greeting us with the banner: A plan that’s working.

The inflation policy target has been missed regularly over the past two years, and will be missed for another year. The evidence is that the target has been moved. So by who? And will we be let in on the secret?

About this time last year, there was an overwhelming clamour from market players that New Zealand's interest rates must go up. I admitted at the time I was perplexed as to why, but presumably wiser heads prevailed. And so up went our interest rates.

And I remain perplexed.

The doctrine of the pre-emptive strike against inflation is self-immolating.  Controlling (suppressing) demand growth invariably limits investment in new capacity and so the ability to improve productivity and/or maintain competitiveness.

The spectre of a return to the 1970s was (once again) raised when I dared to suggest recently that our interest rate policy was, to be blunt, self-defeating.  Unlike my accuser, I actually lived through the 70s - and I can remember the pain.  So, please don't accuse me of being soft on inflation.

The IMF's latest assessment of the world's economy contains a surprising policy suggestion. Should we be concerned (again), or is it just another part of the great plan?

If you really thought it was now safe to venture back into the markets now, then it is probably best that you don't read on.

Why is there this clamour for a rise in interest rates? Just what are we trying to achieve?

I truly don’t get it. Many financial market commentators appear to be saying that because the New Zealand economy is a rock star, we need to now endure an increase in interest rates.

I won’t argue here whether or not our rock star status is justified – I’ll leave that for another post (although I am at a loss as to why one would want to be in the same company as Miley Cyrus).