Bill English National Finance Spokesman

28 February 2001

Review of monetary policy fair, says English

National's Finance Spokesman Bill English today welcomed the findings of Professor Lars Svensson, who has been carrying out a review of New Zealand's Monetary Policy.

Professor Svensson found that New Zealand's monetary policy framework is "Entirely consistent with the best international practice of flexible inflation targeting, with a medium term inflation target that avoids unnecessary variability in output, interest rates and the exchange rate".

"This review was essentially conducted in response to concerns voiced by Alliance Leader Jim Anderton. In effect it shows that his fears were unfounded, and were more a product of his own poor understanding of economics," Bill English said today.

"There have been a number of changes to the operation of monetary policy in the last few years which has seen the monetary policy framework continue to evolve as one of international best practice. For example Professor Svensson's report is critical of the period during which the bank used the MCI as its primary instrument of monetary policy. The flaws of that system were acknowledged by the Reserve Bank and remedied with the adoption of an Official Cash Rate (OCR) in March 1999.

"That is a credit to the Reserve Bank and in particular the current Governor, Dr Don Brash.

"Professor Svensson has made some recommendations around the governance and accountability structures at the Bank which I have no problem with, so long as the lines of accountability around monetary policy decisions remain clear," Mr English said.

Ends

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