New PTA ‘similar in spirit’ to old
WELLINGTON: Changes to the Reserve Bank’s policy targets agreement, a shift to decisionmaking by committee and a new governor in Adrian Orr are unlikely to herald a change in the interest rate outlook, economists say.
In a key change, the central bank will include employment in its policy targets, ending a sole focus on price stability.
Signed by Finance Minister Grant Robertson and governordesignate Adrian Mr Orr yesterday, the new PTA reiterates the goal of keeping annual CPI inflation between 1% and 3% over the medium term, with a focus on the midpoint of 2%.
Along with maintaining price stability, the central bank will have a goal of ‘‘supporting maximum sustainable employment within the economy,’’ the new PTA says. At a media briefing yesterday, when asked if employment was already at a sustainable level, Mr Orr said he was ‘‘very, very pleased with the economic state of New Zealand over recent years’’.
Unlike the inflation target, there will be no hard number on employment.
However, the central bank will be required to consider employment outcomes when formulating policy and to outline how it does that in the policy statement.
ANZ Bank New Zealand chief economist Sharon Zollner said the new PTA was ‘‘similar in spirit to its predecessor and we don’t think it will alter the conduct of policy much’’.
Westpac Banking Corp New Zealand chief economist Dominick Stephens agreed.
But National Finance spokeswoman Amy Adams called it an unnecessary change given the strong economy and rate of employment.
She said government policies on employment, investment and immigration had a bigger impact on the economy and the Government should focus on these.
‘‘We’ll be watching closely to ensure Grant Robertson doesn’t point the finger at the Central Bank should job creation and employment slow,’’ she said.
The announcement included another change whereby a committee with the governor as chairman will take over responsibility for bank decisions. — Scoop