Review of Reserve Bank Act announced as Policy Targets Agreement re-signed

Minister of Finance Grant Robertson today released the Terms of Reference for the Government’s review of the Reserve Bank Act 1989, and re-signed the current Policy Targets Agreement with Reserve Bank Acting Governor Grant Spencer.

“Today’s announcement delivers on the coalition agreement signed between Labour and New Zealand First to review and reform the Reserve Bank Act,” says Minister Robertson.

“The current Reserve Bank Act is now nearly 30 years old. While it has served New Zealand well in general, now is the right time to undertake a review to ensure our monetary policy framework still provides the most efficient and effective model for New Zealand.

“This Government is determined to focus on creating more jobs and higher wages for New Zealanders. It is in our DNA to ensure Kiwis have the best possible quality of life through the best employment opportunities. Every part of the economic apparatus needs to play its part in this, including monetary policy.

“This review will be undertaken in two phases. An Independent Expert Advisory Panel will be appointed by the Minister of Finance to provide input and support for both phases.

“Phase One of the Review will focus on the election commitments made by Labour to add maximising employment to the price stability objective of the Bank, and to provide for a committee decision-making model for monetary policy decisions. In addition, the Review will consider whether changes are required to the role of the Reserve Bank Board as a consequence of the alterations to the decision making model.

“The Reserve Bank and Treasury will work jointly in Phase Two of the Review to produce a list of areas where further investigations of the Bank’s activities may be desirable. This list will be produced in consultation with the Independent Expert Advisory Panel. The list, and the next steps for the review, will be outlined in early 2018. This work will incorporate the macro-prudential framework review that had already been scheduled for 2018.

“The changes proposed in Phase One of the review are in line with other central banks in the world. We are determined to progress them at the same time as maintaining the operational independence of the Bank.

“Today, I have also re-signed the current Policy Targets Agreement (PTA) with the Governor of the Reserve Bank. This will remain in force over the remainder of the term of Acting Governor Grant Spencer, which is due to finish in March next year.  A new agreement in line with the outcomes of Phase One of the Review will then be negotiated.”