The National Party will vote against the biggest change in the Reserve Bank Act in 30 years, citing issues with the policy’s dual inflation and employment mandate.
But the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill will pass its first reading on Thursday night regardless of National's opposition, given all Government support parties will vote in favour of it.
The legislation will create an official decision-making committee within the Reserve Bank to decide on areas such as the movement of the Official Cash Rate (OCR).
It will also add employment into the central bank’s monetary policy mandate, alongside maintaining price stability.
This is the area National opposes.
The Party’s finance spokeswoman Amy Adams says the current inflation mandate already factors in several other economic considerations.
“We think that is the right setting – there has been no case made as to why there is a need for a dual mandate.”
She says the Government has yet to provide an explanation as to how the dual mandate would work in situations where employment and inflation are pulling in different directions.
Speaking at Parliament’s Question Time on Thursday, Finance Minister Grant Robertson defended the Government’s policy.
He says having employment in the Reserve Bank’s mandate will help the Reserve Bank look after how the “real economy is operating.”
“Many other countries in the world use it and, in fact, those countries that have a dual mandate, with both inflation and employment, tend to keep inflation under control better than those with a single mandate.”
Central banks with a dual employment and inflation mandate include the US Federal Reserve and the Reserve Bank of Australia.
Speaking to media before Question Time, Robertson said he’s hopeful National – when it’s had the time to digest the Bill in the Select Committee stage – will support it when it comes back to the House.
But Adams says unless the dual mandate clause is changed, National will not be voting in favour of the Bill in its second and third reading.
Also supporting the Bill on Thursday is New Zealand First. In opposition its leader Winston Peters submitted and championed a Member’s Bill to change the Reserve Bank’s objectives to include “critical macroeconomic factors,” such as the rate of growth and the value of the dollar.
Speaking at his Post-Cabinet Press Conference on Monday, Peters described the current Reserve Bank Bill as “a very happy compromise.”
“At least it is a start in the right direction.”
He would not be drawn on specifics.
14 Comments
Stupid changes which will be regretted.
www.stlouisfed.org/publications/regional-economist/january-2008/stable-…
Back in 2008, one of the items on National's 100-day plan was to modify the RBNZ charter to remove the target of zero unemployment, which I believe they did. So maybe the biggest shake up in 30 years, but the zero unemployment target we have only been without for 9 or 10.
Someone really needs to give National a sail or two, maybe some oars, a rudder would help, engine would be marevellous, a decent captain ( and not one who would fall over when questioned by the ICC as to whether he was playing 'fair cricket' with an un-tampered Chinese made ball before his swanned off and retired from the game)
Absolutely lost at Sea, stuck in the 'Doldrums' and very likely to end up eating each other!
People aren't buying into Simon Bridges' rhetoric ramblings. The reality is the vast majority of my fellow Kiwis are now experiencing higher living costs and know the struggle for many is real. They don't blame the COL.
Bridges has shot himself in the foot countless times since becoming leader. His many varied and ridiculous remarks would be offensive if not so contrived. If he's still leader going into the next general election, the YouTube compilations of his remarks will be priceless.
The fact National elected this wannabee John Key speaks volumes.
https://croakingcassandra.com/2018/07/26/reserve-bank-of-new-zealand-mo…
For a more well considered view of the changes.
I think we are missing the point here, for the politics. How National/Labour do or don't look is irrelevant.
Zero unemployment is at best impractical. It puts massive strain on wages (thereby stoking inflation) and severely limits business activity. How are you meant to start a business if there is no one to employ? What incentive is there for anyone to set out on their own? Shake things up? Try something different? Do things better? There are very strong arguments that it would lead to a very stale society lacking in any dynamism. It's dead brain thinking....unemployment is bad therefore it would be great if we had none. While it is bad for someone to be unemployed all the time or if everyone is unemployed, unemployment in itself is not a bad thing.
And why would we trust central banks to do more than they already do? They have a terrible track record of doing what they do already. They do not let the economy go through the very necessary pain of recession constantly blowing air from one bubble to the next. Greenspan has to be a poster boy for central bank failure but he has plenty of company.
Since the advent of the Federal Reserve markets have been significantly less stable. Control inflation? Since the advent of the federal reserve the US dollar has lost over 95% of it's value. Great job controlling inflation! For the sake of avoiding a little short term pain they kick the can down the road until we end up with massive instability. They protect and bail out banks and other corporate failures and actively engender inequality. Their bang up job of "fixing" the GFC has lead to the most unequal society we have seen in one hundred years and destined our great grandchildren to debt servitude.
Why would we trust them with something else when they have failed to reduce instability, or control inflation? And how would they create employment? We have had low interest rates in New Zealand for years and what has happened? Everyone has hocked themselves up to the eyeballs on houses and credit. We haven't created any new industry or real growth. Productivity is terrible. People have just taken the path of least resistance, like we always do.
It's this faulty economic view that the economy is a big machine that we understand. You pull one, lever (interest rates) and you get one result (inflation or not). It's nonsense. Actually it's chaos theory, you pull that lever and a billion things you weren't aware of screw up all your good intentions.You might as well not pull the lever and save the inflated salaries and ridiculous mumbo jumbo doublespeak.
It's like my other favourite, the one when governments tell us they are going to build the next silicon valley. News flash politicians, you had nothing to do with Silicon value. It arose spontaneously via a random confluence of events that no one could have predicted.
Educate us government. Keep us healthy, warm, safe on the streets. Keep the roads maintained. Do those things the market has not been able to price correctly but that still have value. Otherwise stop talking talk you cannot walk and being so arrogant to believe you can do what thousands of politicians before you have not been able to.
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