Labour should be careful with Reserve Bank Review

The Labour Party should be careful with its review of the Reserve Bank so there remains complete clarity over the Bank’s primary role, National Party Finance Spokesperson Steven Joyce says.

“The Reserve Bank has done a good job managing monetary policy for New Zealand in recent years, and has played its part in New Zealand’s strong economic performance,” Mr Joyce says.

“With the help of sensible government policies, the Bank hasn’t had to resort to unorthodox approaches like quantitative easing or zero or negative interest rates in order to navigate the Global Financial Crisis as many other Central Banks have.

“Notably, New Zealand currently has the third-highest rate of adult employment in the whole of the developed world. The Bank already takes employment into account when setting interest rates so this makes Mr Robertson’s plan to introduce maximising employment as a second objective for the bank redundant at best, and potentially confusing.

“Monetary policy can only work successfully alongside appropriate fiscal and microeconomic policy settings and these are controlled by the government of the day. Mr Robertson needs to be aware he won’t be able to put in place policies that reduce employment and then blame the Reserve Bank if they can’t achieve full employment.

“Regardless of what he writes into the Reserve Bank Act, it will be Mr Robertson that is accountable for any decline in employment in the New Zealand.

“National is supportive of potentially formalising the current informal decision-making committee process of the Bank,” Mr Joyce says. “However we will be watchful for any plan to introduce outsiders onto the committee because that could blur the Bank’s accountability.

“We will also keep a watching brief on the second part of the review. We appreciate that part is largely a pro-forma nod to Labour’s coalition agreement with New Zealand First and the very negative views Mr Peters has of the modern and open New Zealand economy. We will be vigilant for anything which would be detrimental to the economic future of New Zealanders.”

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