National is promising to simplify the Reserve Bank’s (RBNZ) job if elected into government next year, so it only needs to target inflation when setting monetary policy.
National leader Christopher Luxon told Bloomberg he wants to remove the requirement for the central bank’s Monetary Policy Committee to target “maximum sustainable employment”.
The Labour-led Government created the RBNZ’s dual mandate in 2018, following a review of the Reserve Bank Act 1989.
Luxon also told Bloomberg the party is committed to removing a line from the Monetary Policy Committee’s remit, requiring it to “assess the effect of its monetary policy decisions on the Government’s policy to support more sustainable house prices”.
The Government made this change in February 2021. It arguably hasn’t altered the way the committee has set interest rates, but has seen it detail the impacts its moves have on house prices in more detail in its quarterly Monetary Policy Statements.
Asked to verify and elaborate on his comments to Bloomberg, Luxon told interest.co.nz, "The government should direct the Bank to go back to focussing on its core mission of price stability, like it did (with reasonable success) for most of the last 30 years.
"There’s been too much mission creep at the Bank, which is to be expected with the Government continually meddling with its objectives and trying to pass responsibility for its own failures onto the Bank.
"Giving the Bank multiple, potentially conflicting objectives makes it harder for the Bank to do its core job of controlling inflation, and harder for the Government and the public to hold the Bank to account.
"Things like removing the barriers to building houses, supporting businesses to create jobs, or ensuring the welfare system is focussed on getting into work are all issues for the Government to address, not monetary policy."
Luxon's comments come as National MPs have focused their energy this week in Parliament on attacking the Government over the rising cost of living.
Luxon's comments echo English's
Former National prime minister and finance minister Bill English, in a March 2021 interview with interest.co.nz, accused the RBNZ of overcooking its response to Covid-19 by loosening monetary policy too much.
“I’m not a fan of giving central banks several targets,” English said.
“It makes their job pretty difficult and it makes it harder to predict how they’ll behave… It sort of washes into the political issues when you’re dealing with inflation and employment and housing…
“Sometimes politicians can get a bit too reliant on central banks.
“There are some things they [central banks] can do, and some things they’ve done pretty well. Either they or the politicians are expecting them to achieve more and more objectives - whether it’s now moving into climate change - it creates uncertainty.”
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