Have your say: Govt says NZ monetary policy fine, RBNZ to do more housing work
20th Feb 09, 2:35pm
Finance Minister Bill English released Government's response to the Finance and Expenditure Committee's inquiry into New Zealand's monetary policy framework, saying the existing framework was "sound" and "world-class." However, Government also recognised that with the current framework, the Reserve Bank's ability to deal with shocks, such as international oil price rises, was limited. The response argued that monetary policy on its own could not deliver a growing, open and competitive economy and stressed the need for strong initiatives from Government to deliver higher incomes and living standards for New Zealanders. "In the long run, monetary policy influences the price level and little else, as economic growth is more dependent on the behaviours of households and firms, innovation, and the quality of investments, infrastructure, Government regulation and spending decisions, which all feed into productivity and the overall competitiveness of the economy," Government said. The response also said Government would look to increase the Reserve Bank's involvement in wider reviews of the housing market and get it looking at options to deal with other problems. Despite not currently changing New Zealand's monetary policy framework, Government did say it would continue to look at how the framework could be updated over the long run. "(W)e can continue to learn and adapt the monetary policy framework to new challenges. The last economic upturn has taught us that managing asset bubbles matters," it said. Former Foreign Minister Winston Peters pushed for the the review into New Zealand's monetary policy framework, arguing that three economic indicators - employment, exporting competitiveness, and the exchange rate - should be written in to the Reserve Bank Act to ensure they were weighted equally by the central bank in its attempt to regulate inflation. Government declined to do this, saying: "a shift to multiple objectives could be damaging to the real economy if it were perceived to signal a lesser focus on controlling inflation." What do you think? Is English right in saying the existing framework is sound, or does it need to be changed/updated? How? Should the RBNZ be made to focus on multiple objectives, or should it just stick with inflation? How could New Zealand better deal with international price shocks? Comments below please.