Feds Asks Why Fool Around With The Reserve Bank Act?

Federated Farmers sees the Government’s decision to proceed with adding employment to the Reserve Bank’s monetary policy mandate as a step backwards for New Zealand.

Feds economics spokesperson and vice president Andrew Hoggard says Federated Farmers has no problem with a goal of reducing unemployment, but forcing the Reserve Bank to be concerned about it, is not the way to improve it.

"Putting an employment consideration into the Policy Targets Agreement is one thing, as previous PTAs have included a number of factors the Reserve Bank should take into account when setting monetary policy.

"But putting a formal dual mandate through a change to the Reserve Bank Act is a step too far."

New Zealand’s monetary policy has operated at world’s best practice since 1989 and reviews in 2001 and 2007 confirmed this.

"Our monetary policy system is not broken. Let’s not put it under pressure by trying to use it to do things it’s not designed to do."

Feds would like to know how, or who, will decide what "maximum sustainable employment" looks like.

"We are concerned it adds a potentially contradictory measure that could cause confusion as to what the Reserve Bank’s focus actually is.

"It could result in overly loose monetary policy if employment is given an unduly high priority. It also opens up the Reserve Bank to greater political interference as politicians weigh in on what they think is maximum sustainable employment," Andrew says.

"And rural New Zealand’s view of what constitutes ‘maximum sustainable employment’ is likely to be quite different from what is tolerated in urban centres."

The Reserve Bank Act is a crucial cornerstone of economic policy that has served New Zealand well.

"It is a pity to see it being undermined."
ENDS

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