Rennie pushes for RBNZ reform
A report ordered by the former National Government has largely backed Labour’s plan for reforming the Reserve Bank, but the new Government seems less than excited.
On Monday the Treasury released a report by former State Services Commissioner Iain Rennie, ordered by former Finance Minister Steven Joyce in 2017.
The report recommends sweeping changes to the way the Reserve Bank makes its decisions.
Although since 2013 the Reserve Bank has made interest rate decisions though a committee of its top executives, the governor has the right to make the decisions entirely by him or herself.
Coupled with the bank’s powers over banking regulation, there have been claims that the Reserve Bank confers more power on the governor than any other central bank in the world grants to a single person.
Rennie’s report recommends major changes, some expected, some not. Not only did he suggest a committee-based decision making process, but also added that such a committee should include ‘‘external expertise’’ instead of just officials from the Reserve Bank.
The Reserve Bank would also be forced to release minutes relating to its decisions, something former governor Graeme Wheeler blocked.
‘‘[W]ith respect to monetary policy decision making, there should be a high level of transparency with respect to the nature of the committee’s policy deliberations,’’ Rennie wrote.
‘‘This would reduce the level of key person risk inherent in the current system, would support a more resilient institution and support the political legitimacy of the decision making system.’’
The report has been the subject of much speculation within bureaucratic circles. For one thing, it appears Rennie – who was paid $60,000 to write the report – went far further than Joyce wanted him to.
When the commissioning of the report was released Joyce explicitly said Rennie had not been asked to investigate whether the bank’s decision-making should include outside expertise.
‘‘I just don’t think there’s any proven case or any proven benefit for it,’’ Joyce said in April.
‘‘It’s got to be the [Reserve] Bank’s decision because the [Reserve] Bank’s accountable for it.’’
Joyce said he expected to see the report not long after the 2017 Budget in May. However, Treasury officials did not release it to the Finance Minister until November, weeks after Labour’s Grant Robertson took the job.
Treasury refused requests to release the report. Senior figures within the Reserve Bank are said to believe this was a power grab exercised by the Treasury.
In many respects, the report is much more in line with Labour’s policies to reform the Reserve Bank. The new Government has ordered its own review of the way the bank operates.
But Robertson’s office has declined to comment extensively on the report.
‘‘As announced on 7 November 2017, we are undertaking a review of the Reserve Bank Act,’’ Robertson said in a statement.
‘‘It is likely that certain issues covered by Mr Rennie’s report will also be covered in either of the two phases of this review and we are waiting on reports from the Government’s Independent Advisory Panel on the review before commenting further. The contracting of Mr Rennie was a matter for the previous Government.’’