Legislation to remove the employment target from the Reserve Bank of New Zealand’s mandate will be the first law passed after the 54th Parliament begins next week.
Chris Bishop, the newly-appointed leader of the House, said the new Parliament will sit from Tuesday and the first week would be taken up with ceremonial and procedural processes.
There will then be two weeks in which to pass some key legislation—such as repealing Fair Pay Agreements, Resource Management Act reform, and the clean car discount—before the Christmas break.
But first off the blocks will be legislation that returns the RBNZ to a single monetary policy mandate, focused on fighting inflation. Bishop said it would be the first government bill to go through all stages.
The RBNZ’s monetary policy mandate was revised in 2018 to introduce a dual mandate of promoting price stability and supporting maximum sustainable employment.
Employment was already a key consideration for the central bank prior to the law change, but the amendment to the Reserve Bank of New Zealand Act formalized the arrangement.
Prime Minister Christopher Luxon and Finance Minister Nicola Willis met with RBNZ Governor Adrian Orr on Tuesday, ahead of the November Monetary Policy Statement.
Luxon said it had been a “very constructive meeting” and he had confidence the Reserve Bank would be able to bring inflation back into the target range.
“In my conversations yesterday, with the Reserve Bank Governor, I was pleased to hear his obsession and his focus around driving inflation lower,” he told reporters.
“Also, it was helpful to have the Secretary of the Treasury there to make sure that we're getting the fiscal and monetary policy joined up, and not working at cross purposes, which is what we've observed over the last few years”.
Despite frequent criticism of the RBNZ while in opposition, Luxon said he now shared a “united goal of going after inflation” with Governor Adrian Orr.
“He can only go so far if we don't have our fiscal situation sorted and under control. That's why we need to go through government spending with a very big focus on that,” he said.
Luxon said it was “incredibly disappointing” to see the central bank warn it may need to lift the Official Cash Rate higher, in part - he said - due to Labour’s higher spending.
Orr said the higher interest rate track, outlined in the Monetary Policy Statement, was partly because government spending was higher than the bank had previously expected.
“But the bigger driver of it is actually the total level of spending in the economy, and that is largely driven by the growth in the population,” he said.
The meeting with Luxon and Willis was part of a routine process to brief the Government on the economic outlook and did not include talk about changing the bank’s remit.
“The vibe in the room was incredibly constructive, and highly focused on the job at hand. And the number one job at hand for us is to reduce inflation”.
While the remit was not discussed, the Governor said reporters should read the central bank’s own review which was published last year.
It suggested making the inflation target the primary goal, with the employment target a secondary consideration.
“We can never ignore the impacts on the real economy, the labor market and so on, but [we can give inflation] primacy,” Orr said.
Other possible changes proposed in the Coalition Agreements include setting a specific timeline on inflation targeting and replacing the seven person Monetary Policy Committee with a single decision maker.
The initial bill passing through Parliament before Christmas will only remove the employment mandate and the other changes will be considered later — after advice has been provided.
Orr suggested the central bank might advise against these other changes.
The lag of monetary policy and unpredictability of economic shocks made it “extremely difficult” to set an exact time limit for achieving the inflation target, and making monetary policy decisions as a committee had increased the level of scrutiny and discipline involved.
Finally, the Governor was asked about whether he would make changes to the use of Te Reo Māori within the central bank.
Orr said the bank was “very proud” of its Māori name, Te Pūtea Matua, and it would continue to use it.
“Our embracing of Te Ao Māori has been more about how we work together as opposed to what our mandate is. All of our actions and activities are firmly, firmly anchored to our legal mandate,” he said.
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“Our embracing of Te Ao Maori has been more about how we work together as opposed to what our mandate is. All of our actions and activities are firmly, firmly anchored to our legal mandate,”
Appropriating Maori deities for some kind of virtue signaling stunt is not cool IMHO. Disrespectful to Maori people and culture.
I remember this article from a few years ago in Bitcoin Magazine, which criticized the use of RBNZ's Maori terminology. Even if you're not into bitcoin it's an interesting viewpoint: https://bitcoinmagazine.com/culture/new-zealands-past-putea-and-future-…
Neither he, nor the new Govt., have a clue.
Resource scarcity coupled with growing competition, can only result in inflation, recession, inflation, recession; a roller-coaster down the backside of the Hubbert Curve. At some point, financial collapse via mass recognition that collective debt is unrepayable, and by some orders of magnitude at that.
But no; let's fiercely stick to tackling inflation. A bit like chanting the Nicene Creed. 'And I believe in...'
So PDK in your opinion is there any hope at all? I get that the rinse and repeat cycles we operate in are tedious and yes more than likely unsustainable, but whats the answer? Are you simply saying we are all fkd or is there a way out in your opinion? De-population? Massive reduction in standard of living? World war?
I am all on board with the likes of an end to mass consumerism, standard of living not sustained simply by huge debt etc but would be interested to hear if you have a way forward that a layperson could not only understand, but relate to?
The entire world economy is based around the premise that the number of humans will increase at an exponential rate, hence in NZ at least, why super is set up to be paid by the working of the time. Like bacteria in a petri dish, we can't outbreed the current struggles by necessity of living on a finite planet.
You cannot vaccinate a population against all diseases. Malnutrition and most water caused illnesses are not viral, likewise air pollution in populations that burn for heating (including ours) have shown unreasonable higher rates of respiratory illnesses that are exacerbated by diseases (hence why it was a disproportionate number more affected with respiratory issues in the South Island compared to the North). mrna is just one form of vaccination technology as well it is not a magic bullet for vaccination for all viruses (and it can barely handle to keep up with the mutations in poorly vaccinated populations). Maybe if we actually reached herd immunity through vaccination we could eliminate viruses in our population (like we had done with polio, smallpox, measles) but morons are not going to let that happen again and are instead trying to increase the viral spread (like the resurgence of measles outbreaks in unvaccinated populations who then go on massive holiday trips, work in crowded areas or to literal infection parties).
As vaccination has been one of the greatest preventions in early death and disablement, (much like stopping child slave labour and improvements to manufacturing & sewage safety), perhaps those against vaccination are trying to achieve depopulation in a random and poorly controlled release of unrelenting trauma. But in most cases it is likely we will need a less random method so we don't lose those with essential knowledge or skills of businesses and healthcare when using viruses in a hit by the bus method of depopulation.
There is no managed way out unless you can persuade a majority in all major countries in the world to voluntarily lower their standards of living back to the 1970s - further back if you want an equitable distribution. So we will march forward until we crash and then get forced back to 1920s living standards and mass depopulation (from increasing deaths, not falling birth rates). The crash will not be overnight but drawn out over 20 years with each year worse than the previous one - it will not be pretty with food shortages, mass unemployment, climate impacts and war.
This has been such a non-issue IMO. The RBNZ were always going to target inflation first and foremost, maximum employment was always a nice to have, whether legislated or not. I doubt it’s changed a single RBNZ interest rate review since its inception.
I don’t care whether they keep it or remove it, but if that makes your list of top priorities then the last government can’t have been as bad as we’ve been told.
Exactly. Their modus operandi is rubbishing the previous government and removing their policies whether it is useful or not. How many times has Luxon said 'the last useless government'. It's becoming unpleasant and tiresome. He's such a talking head. Do they any policies apart from housing, immigration and bashing the bottom feeders?
"Luxon said it was “incredibly disappointing” to see the central bank warn it may need to lift the Official Cash Rate higher" OMG Christopher, you have just asked them to only consider inflation !!!! I find the first 3 days of this new government incredibly disappointing, top priority, 3 billion tax relief (retrospective!!) to property investors, Shane Reti (no longer a 'doctor' in my book) repealing cigarette reforms..............
Hahaha independent? They've monetised every single crap Labour came up with, without any regard for fiscal responsibility, hung all that crap debt on our future generations that your children and your children's children will be paying for. Practically fked the country with inflation and now is in charge of fixing their own fkups without a single blowback/heads rolling? That "central bank independence"? Now who look like an idiot :P
Agree.
The smoking thing was prob just a deal they did with tobacco whilst in opposition.
The funny thing is that nats are focussing rbnz on taming inflation.. whilst they simultaneously stoke it through tax cuts, stoking the house market and increasing immigration.
Where is the plan to grow exports and a productuve economy.... lol.
So much hand wringing in the media.
Making vices illegal does not work.
Control can - but with alcohol we hardly even bother.
Vaping has gone through the roof - those with vices will find one
Nobody is forcing anybody to smoke - education is the key.
Illegal imports of cigarettes' is already a major issue -making it illegal will hand entirely to the gangs.
How about we show we can handle illegal drugs and alcohol laws first?
Makes sense, this puts inflation control firmly on RBNZ and unemployment will be the preserve of government. Generally New Zealand is an aging society so one might reasonably expect the labour market to be kept tight as a result of having fewer workers per consumer.
Imagine you are the health and safety officer at your company, your only mandate is zero health and safety issues, you could go really over the top at that goal at the expense of company profits. If company profits were a second priority you may not. In the real world it probably makes little difference unless you got to that role without understanding the trade offs.
Does the inflation mandate include property price inflation too given it's the ultimate driver of monetary inflation issues?
Will there be any solutions offered to correct the increased financial instability enabled by the RBNZ, all previous governments and the people over the last 40 years?
The two are intricately linked.
Which would mean addressing the science of economic theory/beliefs, the role and purpose of government, a meaningful collective vision of "the economy" (which ultimately is just made up of people), whom is ruling whom, and the role of the sovereign individuated person to co-create a new direction/future.
If we can't choose this and continue to run with the status quo, it's highly likely changes will be forced upon us.
It would be a start, but without visionary leadership and the corruption of fear/greed/competition/division/scarcity amongst the people, not likely to happen without a major catastrophe first.
One would also need to address the current "wealth" narrative, the hoarding model and ultimately diving deeper into the "values" of capitalism and whether they serve humanity.
Then the question becomes what is humanity?
Thanks Dan. Well written and informative.
Please can my fellow commenters STOP with the repetitive political lobbying nonsense.
Just constantly and repetitively; blaming the old government and calling them the worst government ever, talking about co-governance constantly, displaying racist tendencies (either way), or criticising this current government without giving them a chance.
You may be right, but you do come across like a broken record with very little enlightenment to offer, and you 100% lose any credibility along the way.
I propose we consider a two year self imposed break from injecting our political views on this chat. There will, most likely, be no election during that time, so your collective political council and wisdom can be restored in time for the next campaigning cycle. If you think it actually makes a difference (?)
I am not looking to upset the Apple cart and having read some of the comments here, I acknowledge I may well be breaking my first rule by writing this message… “Never get into a fight with an idiot. They will bring you down to their level and beat you with experience.”
Ha ha, touché.
I have no issue with name calling. I'm just asking for a drop the mic moment... so maybe, just maybe, we are not required to read the same insults from the same people in the comments of every single story.
EDIT: Also, no one cares who other people voted for on a random and anonymous comments section, so saying I am super happy with my decision to vote for (abc.) is unnecessary. Unless you voted for the McGillicuddy Serious Party, we'd like to hear from those people.
This is New Zealand though. I guess it's sort of an extension to our die hard rugby fan culture, except at least in rugby the banter between fans is generally civilized.
Not sure what it is about politics that turns people into such nasty pathetic pieces of work, I guess the "themes" or cliques behind the political parties sort of tap into people's egos or insecurities. E.g. If you're a National/ACT supporter you're seen as being part of the "elite and successful", to substantiate your position to others online you must shit on everyone perceived as less fortunate.
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