National’s Finance spokesperson Paul Goldsmith today called on the Governor of the Reserve Bank to clarify his statement yesterday and be explicit about the Reserve Bank’s intention to finance Government debt directly.

“The Governor of the Reserve Bank is reported to have stated yesterday that the Reserve Bank would not rule out directly lending money to the Government.

“That would be a significant new policy step.

“The current quantitative easing programme sees the Reserve Bank purchase Government bonds on the secondary market, with the goal of reducing long term interest rates. Purchasing Government bonds directly from the Government would be a bold new step. It is something the Australian Reserve Bank ruled out yesterday.

“I urge the Governor to clarify his statement and be explicit as to whether the Reserve Bank is seriously considering direct purchases, and if so why, in what circumstances and with which safeguards in place.

“If this is the Reserve Bank’s new position then we believe it would best be outlined in a formal statement, rather than mentioned in passing during an interview.”

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