monetarism

The Government’s new arrangements with the Reserve Bank represent an explicit acknowledgement of a major shift in theoretical underpinnings; whether it makes much change to the Bank’s operations is another matter.

One of the residuals of Rogernomics (neoliberalism) that the Clark-Cullen Government left unfinished was monetary policy. The Ardern-Peters Government seems to have taken on the challenge.

Are Labour’s proposals for the changing the way the Reserve Bank operates sensible or nutty (as nutty as the current legislation)?

Section 8 of the 1964 Reserve Bank of New Zealand Act stated that ‘monetary policy of the Government ... shall be directed to the maintenance and promotion of economic and social welfare in New Zealand having regard to the desirability of promoting the highest degree of production, trade, and employment and of maintaining a stable internal price level.’

The Reserve Bank cannot deliver affordable housing by itself. Its actions have to be coordinated with the government's. Unfortunately the monetarist framework of the Reserve Bank Act obscures this.

The tensions between the Reserve Bank and the Government over housing policy go back to the mistaken economic thinking in the 1989 Reserve Bank Act. Monetarism ruled and it is that underlying monetarist approach which is creating the tensions.