Reserve Bank reforms may be sped up
The Government could make changes to the central bank as early as March by appointing a reforming governor and making a prompt shift to policy settings, a former bank official and economists say.
An opening at the top of the Reserve Bank of New Zealand (RBNZ) gives the fledgling Government the opportunity to make full employment a focus alongside inflation, pre-empting a more lengthy legislative process.
Much could be accomplished by a quick rejig of the Policy Targets Agreement (PTA), which sets out the conditions for achieving the bank’s monetary policy target, former Reserve Bank official Michael Reddell said.
‘‘If you get a new governor who
"That's going to be one of the tests as to how serious they are." Michael Reddell
is broadly sympathetic to the direction you want to go in, you can write quite a lot into the policy target agreement,’’ he said.
‘‘To my mind that’s going to be one of the tests as to how serious they are, as to whether they really want to change the bank.’’
The Government has said it will review the Reserve Bank Act to include employment in its mandate, which currently focuses solely on inflation.
It could also make the exchange rate a higher priority in the PTA to satisfy junior coalition partner, New Zealand First, which favours lowering the local currency to boost exports.
A greater focus on employment would mark a shift for the first central bank to introduce an official inflation target in 1989.
The proposed changes have already seen the New Zealand dollar fall more than 5 per cent since before the election and markets would be keen to see what the details were, Stuart Ive of OM Financial said.
Possible candidates for the governor’s job include the RBNZ’s deputy governor Geoff Bascand and Superannuation Fund chief executive Adrian Orr.
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Reuters