How do you think about those basic dynamics?

Well, I mean, all the things that you've said are true in their own way.

It is true that under conditions of perfect competition, it is indeed the case that prices will tend to the lowest sustainable level over time and that you can have a situation where with the given technology, you can't do any better for consumers.

Just to put colour in that, I think...

The retail market for groceries in New Zealand, this is the wide range, the common or garden food items for the pantry and the more specialized items like dairy and butchery and so on and hardware perhaps.

could be described as pretty well perfectly competitive.

In other words, from the moment that the New Zealand company settlement set up in Wellington, for example, you can look at the pictures from the 1840s and 50s, and see the springing up of all sorts of small businesses providing retail services.

years ago.

What happened in the 80s?

Right.

In the 1980s, two political things happened that affected all our economic policies since then.

The first thing was that the Muldoon government had been in power for nearly a decade, had run its course, and so a change of government was coming up in 1984.

And on the other hand, the policies of Ronald Reagan and Margaret Thatcher overseas in the UK and US were really gathering momentum.

So there was a huge tide of of thinking and argument and sentiment, if you like, against the welfare state that we'd all constructed after the Second World War in favour of smaller government and lower taxes and deregulation and so on.

And in New Zealand, we got a particularly extreme version of that.

In your view, is that because we haven't done this theory of economics right or is it because the theory itself was wrong?

Why is it

worse? In 1912, we set up the public service under the Public Service Act, and it was a career service.

You joined as a cadet.

You worked your way through the ranks.

You became specialised in the particular activities that your department was involved in.

At the end of the day, if you were really good at what you did and worked your way up, you could end up as the secretary at the top of the department.

and be the person who has a great, you know, a whole lifetime of institutional knowledge and experience advising a minister who would often have only come into office quite recently.

Was the Ardern government's agenda undermined or subverted or redirected in important ways by vested interests?

Geoff, do you agree with Christopher Luxon that agriculture is the engine room of New Zealand's economy in 2026?

I mean, in a way, it's back to the backbone analogy, isn't it? If you want to think of the economy as being an organism, there's a question whether it's a vertebrate organism or not.

And if it's a vertebrate organism, then you can think about the bits of the skeleton.

I'd be inclined to think of it rather like this.

We started out the 20th century, with a situation where it could quite reasonably be suggested that farming was the backbone.

The economy really did hang around pastoral agriculture.

Our exports were going to Britain predominantly, and they consisted of wool, certainly, but increasingly meat and dairy products.

The

How is it supposed to work? What is the logic that the Reserve Bank would give you?

Well, the Reserve Bank will give you a different answer almost every time you ask.

I and some colleagues have been asking ever since the Reserve Bank Act was passed in 1989, what is the transmission mechanism? That is, what is the series of changes through which an increase in the interest rate, for example, will somehow bring inflation down? And the interesting thing is that not only in New Zealand, but internationally, it's very difficult to pin this down very precisely.

We can work out what the effect of raising the interest rate is, and we can see various ways in which that might come around to have an influence on the inflation rate, among other things.

But the idea that there is some sort of direct linkage from the interest rate to the inflation rate is quite heavily contested, and it differs from case to case as well.

For example, Russia invades Ukraine, just a hypothetical case, and international prices of various commodities go up as a result.

and prices in New Zealand go up as a result, the New Zealand interest rate has absolutely nothing to do with that whatever.

the whole economy.

Well, yeah.

I'm not entirely sure what Christopher Luxon will have in his mind when he talks about a cost of living crisis because he belongs to a part of society for which the things that matter to ordinary New Zealand households are much less important.

I don't think the Christopher Luxons of the world face any difficulty paying the power bill.

They certainly don't have to pay rent because they are property owners.

They have incomes that are adequate to enable them to travel largely without restrictions whenever they want to.

And they are well enough fed and housed and clothed to be able to live their lives in a sphere of activities and contacts, friendships.

organizations where they are in their element, if you like.

Is that right?

Mate, if you've been working at it since the 1980s, do you reckon this is your year it's going to work?

Well, it's about time.

And with an election coming up, it's a chance for all the political parties to think up something sensible and effective to bring prices down and make it affordable for households.

It really is time that we dealt to the exercise of monopoly power by the Gentilers, Transpower, the lines companies, the whole bunch of them.

And the difficulty is that firstly when we changed all the electricity into a more market system we did not put in place the regulatory restraints that you would expect to prevent monopoly from breaking out and Parliament has subsequently left the government actually with not that many things that it's allowed to do to drive prices down unless the government gets a spine and takes actions such as putting a windfall tax on the gen tailors when they profiteer from dry years, taking the carbon tax off hydroelectricity.

I mean, there's about a billion dollars a year that consumers are paying in carbon tax on their electricity.

Which is nuts.

take it to its logical conclusion, then does this government actually want to drop prices?