Reserve Bank Act to be reviewed

Reserve Bank Act to be reviewed”

New Zealand Finance Minister Grant Robertson confirmed on Tuesday that the country's new coalition government is proceeding with a review of its central bank act to include maximising employment as a goal.

Mr Robertson doesn't intend having a specific percentage target for unemployment.

Robertson announced the government would shortly announce an independent expert review panel to study the current monetary and financial stability practices of the RBNZ in a two-phase process that will first insert an employment focus into the PTA and implement monetary policy decision-making by committee rather than vesting that responsibility in the governor alone.

The move comes ahead of Thursday's Monetary Policy Statement, the first full review of the state of the economy and inflationary pressure since before the September 23 election and the September 30 retirement of the previous RBNZ governor, Graeme Wheeler.

The current 1-3 per cent inflation target band would be retained. But he was not the one who would make those decisions, which were up to the independent central bank.

Robertson said the operational independence of the bank would remain, and he did not accept that broadening its objectives would make inflation rises more likely.

The finance minister wants to "codify that" and bring some external voices to the table that will help improve the decisionmaking process.

"In addition, the review will consider whether changes are required to the role of the Reserve Bank board as a outcome of the alterations to the decision making model".

In phase two, the Reserve Bank and Treasury will work together to "produce a list of areas where further investigations of the bank's activities may be desirable".

Mr Robertson hadn't seen Ian Rennie's report into the Reserve Bank, which was commissioned by outgoing Finance Minister Steven Joyce, but said he looks forward to receiving it. This list and the next review stages will also be made public early in 2018.

Robertson said the current Reserve Bank Act was 30 years old and while it had served the country well in general, now was the time to ensure it was still the most effective and efficient model.

The first phase of the review process would also review "whether changes are required to the role of the Reserve Bank board as a effect of alterations to the decision-making model".

"The Reserve Bank has been subject to several reviews in the past".

Robertson told reporters there was no desire to have the New Zealand dollar included in the review.

Mr Robertson suggests if mandating full employment had been included in the policy-making framework when the Reserve Bank was increasing the official cash rate in 2014, it "might have influenced a different decision".

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