CashRate reminds it’s good Brash isn't governor
Cash rate rise reminds us why it’s so good Brash isn't governor
The decision of the Reserve Bank to raise its Official Cash Rate to 6.25% today is a good reminder of why it is so good that Don Brash isn't in charge of the central bank, and National isn't in government, says Progressive MP Matt Robson.
"Had Don Brash been governor pursuing National's early 1990s annual inflation target of zero to 2%, interest rates in this country would currently be up to one percentage point higher than they are - that is closer to 7.25%," Matt Robson said.
"If National's 1990s policies were still being implemented today, then instead of having a 4% unemployment rate we'd have an unemployment rate closer to 6% or 7% which is what the Reserve Bank used to forecast as the best New Zealand could hope for.
"Instead of having one of the fastest growing economies in the world, we would instead have had much slower growth and many more in welfare as a consequence of having a Reserve Bank that permanently maintained a higher interest rate structure to deliver National's artificially low inflation target year-in and year-our," Matt Robson said.
One of the first things the progressive coalition government elected in 1999 did was to broaden the definition of "price stability". The progressive government instructed the Reserve Bank to better take into account New Zealand's long-term economic and social development interests when making decisions on interest rates.
These days the Reserve Bank aims to keep annual inflation within a range of 1% and 3% over economic cycles. The last time we had a National government (1990-1996) and Don Brash was governor, the Reserve Bank aimed to keep the annual inflation rate within an arbitrarily low zero to 2% each and every year.