Mandate for review

WELLINGTON – The New Zealand Government launched a review of its central bank Act on Tuesday, making good on an election promise to include maximising 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 US cent.

Mr 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 per cent 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 US 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.

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