New Zealand finance minister says will launch review of central bank mandate

By Charlotte Greenfield

WELLINGTON (Reuters) – The New Zealand government launched a review of its central bank act on Tuesday, making good on an election promise to include maximizing employment as a goal and instituting a committee-based decision-making model.

New Zealand Finance Minister Grant Robertson said there was no plan to include the New Zealand dollar, the world’s 11-most traded currency, in the review — remarks that pushed the currency up around a quarter of a U.S. cent.

Robertson said he did not expect the proposed changes to have any immediate impact, but acknowledged that in a situation of high unemployment and slightly high inflation, rates could be lower than might be the case under the current rules.

“My view is that this shouldn’t have a dramatic impact, certainly in the near term,” he told reporters in Wellington.

The New Zealand dollar has fallen more than 5 percent since September’s election, largely because of uncertainty about the new Labour-led coalition government’s plans for the RBNZ. It popped up to as high as $0.6957 on confirmation the currency would not be in the review, and was last trading at $0.6942.

Reforming the central bank was a centerpiece of the Labour Party’s campaign in the recent general election, which saw party leader Jacinda Ardern sweep into power with the assistance of the nationalist New Zealand First Party.

Including employment in the bank’s mandate would bring the RBNZ’s mandate into line with those of the U.S. Federal Reserve and the Reserve Bank of Australia. It would be one of the largest changes in the history of the pioneering central bank, which was the first to adopt a formal inflation target in 1989.

Other proposed changes under the review included instituting a committee-based decision-making model to replace the governor as the single decision-maker and publishing minutes of the bank’s policy meetings.

Robertson said the changes would create more jobs and lift wages for New Zealanders.

“It is in our DNA to ensure Kiwis have the best possible quality of life through the best employment opportunities,” he said. “Every part of the economic apparatus needs to play its part in this, including monetary policy.”

Robertson said the government planned to introduce a legislative bill as early as possible next year “to progress the policy elements” of the review.

The shake-up comes as the bank searches for a new permanent governor. Robertson on Tuesday re-signed the existing policy targets agreement with Acting RBNZ Governor Grant Spencer, whose term expires in March.

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