Bank’s role in cost of living crisis queried

National is calling for an inquiry into how a ‘‘tidal wave of cash’’ poured into the economy caused the current cost of living crisis.

Leader Christopher Luxon said the Reserve Bank and Government had taken ‘‘unprecedented’’ steps to pump money into the financial system in an attempt to shore up the economy when the pandemic struck.

‘‘The massive and ongoing monetary and fiscal response unleashed a tidal wave of cash into New Zealand’s economy.

‘‘The Government should initiate an independent public inquiry into the Reserve Bank’s monetary policy response from March 2020 until late 2021, to better understand the lasting impact of key decisions, the length of stimulus and any lessons that can be learned for the future.’’

Luxon said it would not be credible for a review to be led by the Reserve Bank or Government agencies. ‘‘New Zealanders deserve an independent appraisal of the decision-making during this extraordinary time. Households struggling through a cost of living crisis need assurance that economic decisionmakers are doing everything possible to prevent a repeat. Quite simply, could the worst of today’s inflation hangover have been avoided and if so, how can

we stop it happening again?

‘‘The terms of reference for this inquiry should be drafted in consultation with parties across Parliament. A key question will be the roles the Finance Minister and the Treasury took in both facilitating the Reserve Bank response and co-ordinating with it.

‘‘The inquiry should be timebound, to ensure public scrutiny of its outcomes prior to the appointment process for the Reserve Bank Governor, which is required ahead of the end of Adrian Orr’s current term in March next year.

‘‘It’s important that New Zealanders have confidence in the country’s economic and fiscal settings and that lessons are taken from recent extraordinary actions.’’

Deputy leader Nicola Willis said the inquiry should look at things like the whether the Reserve Bank’s programme of largescale asset purchases and funding for lending, together with low interest rates, were ‘‘overstimulatory’’ for the economy combined with the fiscal stimulus being provided by the Government.

Former governor Graeme Wheeler co-authored a report with New Zealand Initiative research fellow Bryce Wilkinson, released yesterday, which accused central banks of errors of judgment in overdoing interest rate cuts, and in their policies of quantitative easing.