The Reserve Bank of New Zealand – Te Pūtea Matua – is commencing its legislated 5-yearly review of its monetary policy Remit. The Remit is provided by the Government and is used to guide the Monetary Policy Committee’s (MPC) decision making in its pursuit of low and stable inflation and supporting maximum sustainable employment.
“The Reserve Bank is seeking feedback to ensure that the Remit framework is the best it can be for our legislative purpose, and ultimately the prosperity and wellbeing of all New Zealanders. This is the first review of the Remit under new legislation that was passed in 2018,” Mr Orr says.
“I encourage you to take part in this review process,” Chief Economist Paul Conway says.
“Do people think the inflation target is about right? How should we go about supporting maximum sustainable employment? How relevant are major economic trends under public discussion, such as house price sustainability, distributional outcomes, or climate change? We hope to see a wide range of views,” he says.
Public consultation is open from 1 June – 15 July. You can have your say by completing a quick survey or by reading the full Consultation Paper and submitting your feedback. Your feedback will be used to inform an assessment of any possible changes to the Remit, which will again be consulted on later in 2022. We will then also seek views on the Monetary Policy Committee’s Charter – the document that sets out the MPC’s meeting processes.
The Reserve Bank’s advice will go to the Minister of Finance in 2023 for a decision on if and how the Monetary Policy Remit and Charter will change from 2023 to 2028.
Timeline
Consultation open from 1 June – 15 July, 2022.
How to have your say:
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Feedback closes at 5.00pm on Friday 15 July 2022.
Round two of consultation: Late 2022
Final advice to Minister: March 2023
Minister considers advice and makes decision as soon as practicable after that
How Monetary Policy works
Every six weeks, the Monetary Policy Committee at the Reserve Bank decides whether to move interest rates, which feeds through to borrowing and lending rates. This affects everyone in New Zealand, working or retired, savers and borrowers.
The MPC raises interest rates when the economy is running too hot and inflation is rising and lowers rates when the economy is too cold, with falling prices or rising unemployment. The aim is to keep inflation low and stable and support jobs, making it easier to plan for the future.
Since the Reserve Bank became responsible for keeping inflation within a target range in the 1990s, monetary policy has contributed to wellbeing by generally keeping inflation low, and more stable and predictable, and has stabilised the economy and employment through a wide variety of economic changes.
