New Zealand Opposition Eyes Quick Change to RBNZ’s Mandate
(Bloomberg) -- New Zealand’s main opposition National Party would quickly remove the central bank’s dual mandate and return it to a sole focus on inflation if it wins the October election.
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The party wants to show that it’s serious about eradicating excess inflation from the New Zealand economy, finance spokesperson Nicola Willis said in an interview with Bloomberg News Thursday in Wellington.
“I can say that we’ll be moving to do that quite quickly on forming government,” she said. “What we want to do is return to the conventional mandate that New Zealand had in place for many years whereby the inflation target was the key objective.”
Since taking office in 2017, the Labour Party has overhauled the Reserve Bank, expanding its mandate to include both stable prices and maximum sustainable employment, introducing a new policy committee and changing its governance structure. Finance Minister Grant Robertson also added house prices to the RBNZ’s monetary policy remit despite objections from Governor Adrian Orr.
National, which is leading in opinion polls ahead of the Oct. 14 vote, has accused Labour of “economic mismanagement” and blamed it for fueling “rampant inflation,” which is currently running at 6%.
National leader Christopher Luxon told Bloomberg in February last year that he wanted to simplify the central bank’s mandate to ensure it achieves its price stability goal of 1-3% inflation over the medium term.
Willis said restoring the single mandate would provide certainty that the RBNZ is focused on inflation.
“We want to build confidence that the Reserve Bank will be focused on that inflation mandate,” she said. “We don’t see it as something novel. We see it just as a return to what was the position prior to the current government.”
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Willis also said that a National-led government would “quickly commission” an independent review of the RBNZ’s monetary policy response to the Covid-19 pandemic.
“Our basic view is those who ignore the lessons of history are doomed to repeat them,” she said. “And we want to learn from anything that could have been done better.”
The RBNZ conducted its own review of its pandemic performance. That found that while it was among the first central banks to begin reducing stimulus in 2021, it could have starting tightening policy sooner. National criticized the review as not sufficiently independent.
The party was also critical of the government’s re-appointment of Orr to a second five-year term earlier this year, and Willis has at times clashed with the governor in fiery exchanges during select committee hearings.
She played down any conflict Thursday, saying both were professionals and will be able to work well together.
“I respect the independence of the Reserve Bank and its governor, and I know that Mr Orr respects the role that the finance minister plays and the democratic mandate we bring to it,” she said.
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