Our submission to the RBNZ’s consultation on the way its Monetary Policy Committee operates – available here – highlights a need avoid “multiple mandates” that could lead to a “de-prioritisation of a clear focus on the inflation policy priority”.
FINSIA’s New Zealand National Council Chair Bernard McCrea SF FIN said it was important for FINSIA to give feedback on the RBNZ’s Remit consultation as an independent voice.
While the request from Governor Adrian Orr for feedback covered several areas such as house price sustainability, FINSIA’s position is that the RBNZ must remain focused on monetary policy strategy given the critically important role that plays in supporting the best outcomes for community and the economy, including downstream issues such as price sustainability.
“Managing multiple mandates can create heightened risk of conflicting priorities and potentially lead to a de-prioritisation of a clear focus on the inflation policy target,” our response noted in response to a question about additional considerations for the Remit.
“It could be argued that a target of achieving higher employment while maintaining sustainable house price growth could be in conflict with one another from a monetary policy perspective.
“House price sustainability is conflicted with rising interest rates to manage inflation. Supply of housing stock is something that manages house price sustainability but with high interest rates no one can afford to borrow the funds to buy the housing stock.
“These themes, in our view, are broader community and societal goals that ought to be the domain of government to manage and prioritise as appropriate.”
According to FINSIA CEO & Managing Director, Yasser El-Ansary F FIN, responding to important consultations led by government and regulatory bodies is a critically important feature of the organisation’s forward strategy.
“As a leading professional body in the financial services industry in Australia and New Zealand, we must be visible in important conversations about economic policy and markets, and we must access the tremendous breadth of experience we have across our diverse membership base,” he said.
“This five-yearly review by the RBNZ is a timely exercise – the significant and rapid shift in monetary policy over recent months has given us all a real-time opportunity to consider the role of central banks in supporting our economic prosperity.”
In recent days the Albanese Labor Government has announced a comprehensive review of the Reserve Bank of Australia, seeking to identify how the bank’s monetary policy and governance frameworks can be improved for the future. The review is the first of its kind in Australia since the early 1980s. FINSIA will participate in this Australian review process and contribute to the consultation process which is underway now. A final report, along with recommendations, is due to be handed to government by March 2023