Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 


New Policy Targets Agreement signed today



20 September 2012

New Policy Targets Agreement signed today

Finance Minister Bill English and incoming Reserve Bank Governor Graeme Wheeler today signed a new Policy Targets Agreement, which sets out specific targets for maintaining price stability.

The new Policy Targets Agreement takes effect on 26 September, when Mr Wheeler starts his five-year term as Governor.

The agreement continues to require the Reserve Bank to keep CPI inflation between 1 per cent and 3 per cent on average over the medium term.

Within this target, the new agreement now requires the Bank to focus on keeping future average inflation near 2 per cent.

The PTA also includes a stronger focus on financial stability, by including asset prices in the range of indicators the Bank monitors, and requiring the Bank to have regard to the soundness and efficiency of the financial system in setting monetary policy.

“I believe that the existing policy targets agreement has served New Zealand well and there are benefits in maintaining consistency in the agreement,” Mr English says. “Therefore, I did not feel that any major changes were required.

“However, the Global Financial Crisis has focused some attention on monetary policy frameworks, and I want to ensure the PTA continues to reflect best international practice.

“Consequently, some additional wording has been agreed with the new Governor to reflect lessons from New Zealand’s last economic cycle and the Global Financial Crisis.

“As we’ve said before, the Government is also working with the Reserve Bank and Treasury to assess whether further macro-prudential tools could help moderate credit cycles, by building additional resilience when it is likely to be needed. That work will continue.”

Mr Wheeler says the new PTA remains focused on maintaining price stability, as well as avoiding unnecessary instability in economic output, interest rates and the exchange rate.

“The focus on the 2 per cent midpoint will help better anchor inflation expectations,” he says.

“In addition, the PTA’s stronger focus on financial stability makes it clearer that it may be appropriate to use monetary policy to lean against the build-up of financial imbalances, if the Reserve Bank believes this could prevent a sharper economic cycle in the future.”

Mr Wheeler also emphasised that the macro-prudential policy tools currently being developed by the Bank should be separate from, but complementary to monetary policy. “The primary purpose of such tools will remain to promote stability of the financial system.”

Mr Wheeler will send a letter to the Finance Minister setting out how he plans to manage his relationship with the Minister, recognising the Bank’s operational independence.

“It will ensure the Government and the Reserve Bank keep each other fully informed about fiscal and monetary policy issues,” he says.

Weblink to new Policy Targets Agreement:
http://www.rbnz.govt.nz/monpol/pta/


________________________________________


© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

PARLIAMENT TODAY:

Gordon Campbell: On Where Greece Goes From Here

As one candid British commentator tried to come to grips with why his confident prediction of a “Yes” vote in Greece has failed so resoundingly, he said that he’d made that prediction from his own viewpoint – as someone with savings to protect. But most Greek people, he suddenly realised, didn’t have that concern anymore after five years of austerity. Duh. More>>

ALSO:

Post-Cabinet Presser: EQC Reform, Greece & Surplus Stimulation

Prime Minister John key discussed proposals for reform of the EQC act and the Greek economic crisis at a press conference in Wellington. More>>

ALSO:

GCSB/NZSIS: Intelligence And Security Reviewers Seek Public’s Views

“We are seeking public submissions to help us determine what issues to focus on during the review,” says Sir Michael Cullen. “We want to hear your views on what the GCSB and NZSIS should be doing to protect New Zealand and how they should do it.” More>>

Education: Schools Funded To Trial Innovative Approaches

Education Minister Hekia Parata has announced the successful applicants for a new $10 million fund to encourage innovative teaching practices. “I’m delighted with the quality of the 39 projects that have won funding in the first round of the Teacher-led Innovation Fund worth a total of about $2.6 million,” says Ms Parata. More>>

ALSO:

Generation Zero: Skypath Granted Resource Consent

Generation Zero is delighted and relieved that the ‘Skypath’ walking and cycling addition to the Harbour Bridge has been granted resource consent. More>>

ALSO:

Housing: Two New Auckland Special Housing Areas

Two new greenfield Special Housing Areas (SHAs) that will provide up to 1800 new homes in Auckland have been announced today by Building and Housing Minister Dr Nick Smith and Mayor Len Brown. More>>

ALSO:

Royals: The Prince Of Wales And Duchess Of Cornwall To Visit

Prime Minister John Key welcomes today’s announcement that the Prince of Wales and The Duchess of Cornwall will visit New Zealand in November. This will be the second joint visit for Their Royal Highnesses to New Zealand. More>>

ALSO:

Tracey Martin Replaced: Ron Mark Is New New Zealand First Deputy Leader

Clayton Mitchell was the successful candidate for the Associate Whip position. Winston Peters was re-elected as Leader by the Caucus. Ron Mark was elected as the Deputy Leader with effect from 10am, Friday, 3rd July. More>>

ALSO:

Rebuild Rebrand: "Regenerate Christchurch" To Replace CERA

The regeneration of Christchurch will be the city’s focus for the next five years as local leadership progressively takes control of the rebuild, Canterbury Earthquake Recovery Minister Gerry Brownlee says. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
More RSS  RSS
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news