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Monetary Policy Committee Remit Review - Supporting New Zealand's Economic Stability | Toitū te Ōhanga

Information from the first and second round of the Remit Review consultation.

About the second round of consultation

The second consultation paper for the Remit Review was based on analysis conducted by the Reserve Bank and built on the feedback from the first consultation. It explains a range of proposals for possible changes to the Remit.

Read a short summary of the consultation document
 (PDF, 1 MB)

Read the consultation document  (PDF, 8 MB)

Read the background papers

What we asked for feedback on

  • The best monetary policy framework for New Zealand
  • The design of the primary objectives for monetary policy
  • The calibration of the primary objectives for monetary policy
  • Additional considerations for inclusion in the Remit
  • The Monetary Policy Committee’s Charter

Watch our webinar

We hosted a webinar for members of the public to find out more about the Remit Review. You can watch a recording of the webinar below.

 

Chris Bloor: Hello and welcome to this briefing session for the Monetary Policy Remit Review. So we released a consultation paper last week, and so this briefing session is to run through some of the analysis that underpins our advice on the Monetary Policy Remit. So just quick round of introductions, I'm Chris Bloor, the Manager of Policy Analysis, and next to me I've got Katy Simpson, who is an Adviser in Policy Analysis, and online I have Paul Conway who is the Chief Economist of the Reserve Bank. So just a bit of how we're going to run the session. So between Katy and I, we'll be running through the slides for 20 or 25 minutes. I encourage you to put your questions into the chat throughout, and then when we get to the end of the slides, we can start answering the questions that you submit. So we have around about half an hour to answer questions at the end of this session.

So just give a bit of background into the Remit Review. So first off, what exactly is the Monetary Policy Remit? So, we have the Reserve Bank Act which specifies that the goals of monetary policy are to achieve price stability and to support maximum sustainable employment. So those are the very broad goals of what monetary policy is tasked with achieving, but then the Remit gives a lot more detail on exactly how it is the Reserve Bank is supposed to go about achieving those in a bit more detail. So the things that the Remit can contain are what weight should be put on these two objectives, a bit more detail on what exactly we mean by these objectives. And also the Act specifies that you can have other clauses which the Monetary Policy Committee should have regard to in setting the monetary policy decisions. So this remit is used by the Monetary Policy Committee every 6 weeks when they make decisions.

And then while we are reviewing this remit, so every 5 years we are required to go through a process where we undertake a thorough review of this remit, and that's just to ensure that this remains fit for purpose and ensures that the Monetary Policy Committee can support the economic wellbeing of New Zealanders. And this is the first time that we've done this review. So it was a requirement, that was put into the Reserve Bank Act 4 years ago.

And so we're midway through this process now. So we released a earlier consultation in June of this year and we received a lot of valuable feedback on that first consultation. And the consultation was really looking at bigger picture issues of what are the biggest issues confronting monetary policy at the moment, and what areas should we think about looking at for future change. That feedback helped feed into a discussion we had with the minister of finance around what issues was he interested in receiving information on to help him make a decision on what the future remit should be. We're now running at the second consultation process, which will run through until the 27th of January, and that will ultimately feed into advice that we provide to the minister of finance around about the middle of next year.

So, in terms of the scope of what we're going to discuss today and what we are seeking feedback on, we're first going to talk through the broad frameworks within which monetary policy operates. So we operate what's called a flexible inflation targeting regime at the moment, but there are other regimes that we could consider. So we're going to talk through some of those different regimes. Then we'll talk a bit more about how we think the primary objectives should be designed and also the calibration of those primary objectives. And then we'll finish off with a discussion about what additional considerations should be in the Remit. And we'll also talk through the Monetary Policy Committee Charter, and that's the document that governs the communication and decision making for the committee.

When we went through the first consultation process, we talked about a number of things which we could consider within the scope of this review, but ultimately having had feedback from that first round and discussed with the minister of finance, we've decided not to keep within the scope of this review. And some of those things are providing more refinement of a maximum sustainable employment objective and also the possibility of adding climate change and distributional issues into the Remit. So this last two issues are really important for monetary policy and we need to understand them to set monetary policy well, but we don't think it makes sense to have a formal target for the Monetary Policy Committee on these two objectives.
So, as we go through this, we have a number of principles that we're considering for what a good monetary policy remit looks like. So down the right hand side of the slide, we've listed five principles that we think are enduring things that a monetary policy remit should meet. So one is that it's legitimate, which basically means that it's consistent with the Reserve Bank Act and also that it's consistent with the will of the public and it has democratic legitimacy. It needs to be credible and help support the anchoring of inflation expectations. It needs to be something that monetary policy can actually achieve. We think it needs to be sufficiently flexible to enable us to respond to a wide range of shocks in a way that enhances the wellbeing of New Zealanders. And it also needs to be clear.

So see, these are pretty enduring principles for what a good remit looks like. But as we've gone through this, we've also had regard for what are the current contextual things within the New Zealand economy which may have changed over the last five years or are important for us to address in this remit. So, there are three things that we think are particularly pertinent that have confronted us over the last five years and we think might be enduring features of the economic landscape in New Zealand. So, one of those issues is that we have been confronting what we call the effective lower bound with monetary policy in the last few years. So that's the point at which interest rates get to it's lowest possible point and it becomes harder for monetary policy to provide further support to the economy. So there are ways in which the Remit could be changed, which helps reduce the risk of the effective lower bound. And we'll talk through some of those. And that may include things like having a higher inflation target or even introducing one of the alternative monetary policy regimes.

But on the other hand, another feature that we're confronting at the moment is that inflation is currently high and is well outside of the inflation targeting band. Associated with that, we are facing significant supply-driven inflation and we think that we may face more supply-driven inflation in the period ahead. And there are a couple of things in the Remit that we could think about, both to improve the credibility of the regime, given that we are trying to bring inflation down, but also give us more flexibility to respond to higher supply-driven inflation. So in terms of credibility, we could think about putting greater emphasis on our price stability objective for example, and for flexibility and dealing with supply shocks and may be useful to think about how we give weight to our different objectives.

So that's very high level how we're thinking about some of the issues in the Remit Review. But I'll pass over to Katy, who'll provide much more detail on how we're thinking about all the details within it.

Katy Simpson: Thanks Chris. Okay, so I'm going to talk you through the main areas in our consultation paper. So because this is the first time under the new Act that we've conducted one of these 5-yearly reviews of the Remit, we started with a big picture question. Does the framework within which the Remit is set still work well for New Zealand? So as Chris talked about, the Remit needs to set out how the Monetary Policy Committee are going to meet our legislative goals of price stability and maximum sustainable employment, but there are lots of different ways the Remit could require the committee to go about this. And at the most fundamental level, there's a question about whether we should be targeting inflation, which measures the change in prices between two points in time, or something else entirely when we talk about price stability.

At the Reserve Bank, we've been targeting inflation for over 30 years and it's what the majority of other central banks around the world do. But in our consultation document, we set out some other options and consider their pros and cons. So I'll try and describe these different options using these charts. So the chart on the left shows inflation, or the growth rate of prices, and the chart on the right shows the level of prices over time. So if an inflation is running at the 2% target, which is the dashed black line on the left hand side, you'll see on the right hand side you just get a nice predictable, steady increase in the price level, shown by that black dashed line. So if we think about inflation targeting, which is the framework we currently use, and look at the purple lines, and if we consider if there was a shock which pushed up the rate that prices are increasing and inflation hit 5%, what the central bank tries to do under inflation targeting is get inflation back down to 2%. And you'll see the purple line comes down and hits that dotted line of 2% on the left hand side.

But if you have a look at the chart on the right, you see this means that inflation increases and then it stays at that higher level. It gets back to the previous gradient, but it's now at a higher level. That's not the case with the other alternatives, where there's some degree of history dependence built into the framework. Which means the central bank has to try and offset some of the impact of earlier shocks to inflation. So with price-level targeting, the pink line, you'll see that on the right hand side that gets back to the previous level of prices, which means on the left hand side you have to have a period of inflation below the 2% to offset that period when it was above 5%. Average inflation targeting, which is the blue line, is a bit of a hybrid of these two and sits between them.
So in our consultation paper, we talk through all the pros and cons of these alternative frameworks in a lot of detail, which I won't go over now. But it mostly just comes down to whether having some of that history dependence built into the framework are worth some of the costs that are associated with that. There's definitely some benefits that we see. It gives certainty for households and businesses when they're thinking about the future, about what the price level's going to be. And it also can help with the effective lower bound issue that Chris mentioned, because it allows a central bank to commit to having interest rates lower for longer if there's a period of low inflation, because they won't have to react as quickly if inflation starts to pick up. But in the consultation document, we also found that a lot of the benefits are quite theoretical and they haven't been seen because not many central banks have tried these frameworks. And there's also some downsides in terms of people having to shift how they think about price stability and they can be quite complex to communicate.

Also, just a note in the consultation document, we also consider another alternative framework, which is nominal GDP targeting, but we also find lots of practical downsides with that one. So we've rolled that one out as well. Therefore, in the consultation document we conclude that flexible inflation targeting is still the best option for New Zealand, and this is the proposal that we're intending to make to the minister of finance when we provide advice next year. And so that's the proposal we're seeking your input on as part of this consultation.
So once we decided to stick within that inflation targeting framework, we need to decide within that exactly what the primary objectives of monetary policy should look like. So this slide shows the current primary objectives in the Remit, which you'll see in two parts. The first is all about the inflation target and the second is about maximum sustainable employment. So as Chris mentioned, because maximum sustainable employment is not something we can easily measure, we've ruled out of scope further defining that part of the target. But looking at the inflation target, there are some key choices that need to be made. We need to consider what level the inflation target should be set at and whether there should be a band around that, and if so, how wide that band should be. We need to decide what measure the inflation target should be based on, should it be the consumer price index, as it is currently, or something else. And finally, we need to decide how much flexibility the Remit should have, and whether the committee should be able to decide for themselves how to trade off between price stability and maximum sustainable employment, and how much flexibility they have about the time that they take to get back to their inflation target. So I'm going to talk about these three things next.

So, starting with the measure of inflation. Currently, most central banks like us use the consumers price index, or CPI, as the measure of inflation to target. It has lots of the features that we are looking for in a good inflation measure. It's representative of the inflation experience by households, it's produced independently of the Reserve Bank and it meets a set of international standards. But it's not the only option. And in the consultation paper, and a separate background paper we've just published as well, we consider all the different measures of inflation that could be used in the Remit. The alternatives are set out there on the slide, and I'm not going to talk through them in detail here, but in general we found that the alternatives come with significant downsides that outweigh their benefits. So we're consulting on the proposal to stick with CPI in the Remit, but we've also highlighted in the consultation paper that we see a lot of benefit from moving from a quarterly release of CPI to a monthly reporting.

So, aside from the measure of inflation, we need to determine the right level to set it and also whether we should have a range of points, or both, and the width of any range around a target. So as this chart shows, New Zealand has had different targets over time. Initially, in the early nineties, we had a target range of 0% to 2%, whereas now we have a range of 1% to 3% and we have this focus on the midpoint. In the consultation paper, we consider 2% is still the right level to centre the inflation target on. We look at the arguments for a higher target such as reducing the risk of encountering the effective lower bound, having more flexibility in the face of supply shocks and the benefits associated with downward nominal wage rigidity, which can help the economy to adjust to shock through wages rather than people losing their jobs. We also consider the arguments for a lower target, which are mostly about reducing the costs associated with inflation, like tax system distortions and distributional costs.

On balance, we find the current 2% target with a band of one percentage point each side balances the costs and benefits positive inflation well, and they help maintain monetary policy credibility and avoids some of the transitional impacts we might feel if we change the target. Particularly because changing the level or the width of the band in the current economic conditions of high inflation, could be seen as moving the goal posts. We also continue to support having a midpoint as well as a range, as we find that having that midpoint really helps to focus inflation expectations at that 2% target. So we've also got a set of questions on these elements of the Remit that we're seeking feedback on here as well.
So as Chris mentioned when he talked about the principles that we're looking at during this remit, the degree of flexibility is another key decision, and there are two main elements in the current remit that determine how flexible it is. There's a time horizon for returning inflation to target, which is currently defined as the medium term, but the Remit could be more specific about what that means and set a number of quarters or years within which the committee should have inflation back to target. And then the other main element of flexibility is that the MPC is currently able to determine how to balance the objectives of supporting maximum sustainable employment and maintaining price stability, and they can adjust that depending on the context at the time. In the consultation paper, we consider including a hierarchical ordering of the objectives that require the MPC to support maximum sustainable employment subject to the price stability objective being achieved. Having the opposite hierarchy and placing the employment objective above price stability, didn't receive much support in our first consultation and it's something that we ruled out of scope for this second stage.
So, the conclusions we reach in the consultation paper are set out on this slide, as are the questions that we're looking for feedback on. Broadly, we see the flexibility as about right in the Remit at the moment. It allows the MPC to adapt to the economic circumstances, but also maintain credibility that they will meet their targets. We do see some merit in considering whether including those hierarchical preferences in the Remit, but we do think keeping the time horizon unspecified best supports wellbeing, because the time to return inflation to target will depend so much on the economic shock being faced at the time.

So that's all for the primary objectives. And we've basically concluded they're in pretty good shape with that main aspect worth considering being the ordering of the objectives. And now we're looking at the additional things the MPC can or must have regard to when making their monetary policy decisions in line with those primary objectives. These can provide important guidance to the MPC and are an important part of the Remit. So this slide shows the additional considerations in the current remit. Clauses 2A and 2B, which relate to the financial system and avoiding unnecessary instability and output interest rates and the exchange rate respectively, continue to work well and we are recommending that they stay in the Remit, but we are recommending some minor rewording to 2A. I'm not going to talk about those anymore here. We do see some room for improvement in relation to clauses 2C, 2D and 3, and we also consider a possible addition to this section of the Remit in the consultation paper. So I will talk you through these issues quickly now.

So firstly, as you will have seen on the previous slide, the Remit requires the Reserve Bank to assess the impact of its policies on house price sustainability. This was an additional consideration that was added to the Remit by the government in March, 2021. The Reserve Bank's proposal here is that the clause related to assessing house price sustainability should be removed from the Remit. This is because, unlike other parts of the Remit, it doesn't give the Monetary Policy Committee guidance about how to make monetary policy decisions. Instead, it's guiding them to make an assessment and report on house prices. House prices are definitely an important issue for the Reserve Bank and they'll definitely be something we need to continue to analyse, but there are other ways that we could achieve the same outcome. Such as moving the request to the letter of expectations from the minister that they send to the Reserve Bank, which would keep the Remit really focused on guiding decision making for that kind of thing.

Currently, the Remit requires the MPC to discount events that only have transitory effects on inflation. Since back in 1990, when we first introduced inflation targeting, the predecessors of the current remit have had a clause along these lines and acknowledge that it's not always possible or desirable for monetary policy to attempt to fully offset every shocked prices. But the possible issue with this clause is that it could be somewhat redundant because the price stability objective is already based on a flexible inflation target in the medium term, as we've already discussed. And it's also a little bit unclear in the way that it's written. Recent experience globally has shown that events that only have a transitory effect on inflation can have second round effects that are more persistent. So if the clause is to remain, we think it would help to clarify that it should only apply to the transitory component of an event's impact on inflation rather than the underlying event that caused it.
We also consider in the consultation paper whether a new clause should be added to the Remit in relation to the governance of additional monetary policy tools. So these are the tools other than changing the official cash rate, such as large scale asset purchases. The consultation paper concludes that this would not be a helpful addition to the Remit. This is mostly because the Remit is about the objectives of monetary policy and what the committee should be trying to achieve, and not about the tools that they should use to achieve them which remain an independent judgement for the committee. Again, as with all of these proposals, we're seeking feedback on this so we can give advice to the minister of finance next year, and the slide shows the question we're posing in relation to this issue.

So that's all the issues related to the Remit that we're seeking input on, but as well as the Remit, we also need to consider whether another document, the MPC Charter, should be amended. So the Charter governs the decision making processes and the transparency of the MPC, rather than what it's trying to achieve like in the Remit. So the Reserve Bank's role is slightly different in relation to the Charter. So we're not setting up proposals here, but we're instead just seeking your input on some broad questions. Firstly, the process the MPC should go through when they're reaching a decision about whether to increase or decrease interest rates. For example, currently this is done by the committee debating and reaching a consensus on the decision, and the main alternative here is a system where each member votes instead.

We're also seeking views about how the MPC communicates. For example, whether they tend to communicate with one voice as a collective, or more individually. So the public's feedback on the Charter will help the committee and the minister of finance come to a decision about whether any changes to the Charter are needed.

Okay, that's all I wanted to cover on the Remit and the Charter. So I think we're ready to hand over to questions.

Georgina Hassell-Hopkinson: Great. So we've had a few come through onto the chat starting out with, "Do you think a wider band around the midpoint, e.g. maybe 0% to 4% could make it easier for the RBNZ to reduce or even avoid huge swings in the OCR?"

Chris Bloor: Yeah mate, that's a really good question. So, I think there's a bit of a trade off to be struck here between a band that is very achievable first. I think the trade off there is around the credibility of the central bank and the accountability, where I guess you could argue that with a 0% to 4% band, there's a little less certainty about where inflation's going to average over time and probably a bit less accountability for the Reserve Bank to achieve fairly low and stable inflation. So, we think that if we were to move to a wider band like that, one of the big things would be, would inflation expectations remain as anchored as they are now or would there be a tendency for inflation expectations to move around? And when inflation expectations move around, it does become harder for the central bank to control inflation over the long run. So those are the sort of things that we'd be trading off and considering whether a larger band would be useful. I think the judgement that we've landed on is we think the 0% to 2% band is probably about right.

Georgina Hassell-Hopkinson: Right. So the next one that we've got is, "How do you consider the risk of global supply shocks and pushing out the price of tradables and impeding a more persistent higher inflation?"

Chris Bloor: Do you want to have a go at that one, Paul?

Paul Conway: Yeah, Hi. Well, how do you consider the risk of global supply shocks and pushing up the price of tradables? I think it's certainly consistent with what we've seen in the current bout of inflation. I think it began offshore, and it hit a very tight New Zealand labour market and became more broad based across our economy. So it's something we're obviously always keeping a very close eye on and we don't respond to offshore shock, such as an increase in the price of oil, that has a temporary of transitory effect on domestic inflation. We lean against more broad based inflationary pressures. So my own view at the moment is that the way the Remit... It's a totally good question. Thanks, Nathan Scofield. But I think the Remit as currently specified, is well-equipped to deal with offshore supply shocks. What do you reckon, Chris? How'd I go?

Chris Bloor: Sounds good.

Georgina Hassell-Hopkinson: Perfect. The next one we've got is that, "Given that we've been told every day that climate breakdown is the biggest challenge we've ever faced, do you think excluding it from the Remit scope is a good idea just because the New Zealand public didn't think that it was important?"

Katy Simpson: I can have a go at that one. So the reason we've ruled out scope for the Remit is definitely not based on not thinking it's important. It's mostly based on just the role of the Remit as being guiding Monetary Policy Committee's decision making. And there's lots of ways as the Reserve Bank that we think about climate change, and again, we're continuing to do those things. But it was both... The question we were asking in the first consultation was really about, is the Remit the right place for the central bank to be thinking about this? And that was what the response came back, which aligned with our view, is that the Remit is not the right place to do that. But that in some ways it is related and related to the last question about supply shocks, because we definitely see climate change increasing the risk of supply shocks hitting the economy and therefore the Remit needs to be ready to deal with those kinds of shocks. But we don't need to define those just as climate change. Climate change is a part of a broader range of risks that the Remit needs to be robust to.

Georgina Hassell-Hopkinson: Perfect, thanks.

Paul Conway: Yeah, I think that's exactly right. And climate change, it comes into our monetary policy deliberations through things like, where's the neutral interest rate globally? And it also comes into the Reserve Bank's mandate through financial stability and the like. So we are absolutely not saying that it's not relevant to the work of the central bank, but we are just saying... We are asking the question is the Remit, as Katie said, the right place for that? And our view is that it's not, it's covered... we've got that through other areas of Reserve Bank work.

Georgina Hassell-Hopkinson: Thanks for that, Paul. We've also had a few ones come through to the inbox. So starting out, "Will the Reserve Bank have to change its remit again if the new government is appointed next year?"

Chris Bloor: So we don't necessarily need to change the Remit. So, there are basically a couple of different avenues through which the Remit can change. So what we're going through at the moment is a 5-year review process, which are required under legislation. So every five years we must provide advice to the minister of finance about possible changes to the Remit, and then the minister of finance can decide him or herself whether they wish to make a change. But there's also an opportunity for any minister of finance at any time, to request advice on whether changes to the Remit could be considered. So if we get a new government next year, that new government would be well within their rights to propose a new remit and seek our advice on that and then make a change to that remit. So where we'd have a change of government next year, I guess we'd see what the appetite for the incoming government is to make changes to the monetary policy objectives.

Georgina Hassell-Hopkinson: Great. All right. Next one we've got from online is... Oh no, excuse me, through the inbox, is, "The consultation document states that New Zealand is the only country in the OECD to not have a monthly CPI. Is this is a hindrance to monetary policy, and what are the chances of seeing a monthly CPI in the future?"

Chris Bloor: I know Paul's a big fan of a monthly CPI, so I'll let him make the pitch.

Paul Conway: You know, more information is preferred than less. I think there's trade offs with a quarterly CPI versus monthly. Obviously monthly, as we're seeing in the US, it's going to be a more volatile series. But in terms of signal to noise, there is, not withstanding the fact that there is going to be a bit more volatility in there, the signal content of getting a readout on CPI on a monthly basis is going to be greater than on a quarterly basis. So yeah, we're in favour of a monthly CPI and, as you said George, I think we are one of the... Was it the only or one of the few, OECD countries that doesn't have one. So yeah, yes please.

Georgina Hassell-Hopkinson: Great. "Does the 2% midpoint target still make sense in the current environment of high inflation? What are the benefits and costs of raising the inflation target?"

Chris Bloor: Katy? You?

Katy Simpson: I can give that one a go. So yeah, I will firstly give a plug that we have put out, as well as the consultation paper, a background paper on the level of the inflation target, which goes through in a lot of detail all the different arguments for it being higher or lower. I think it's interesting the question asked about in the current context, because I think our view is actually in the current context is maybe more argument for staying with our current target, to not create the expectation that any time inflation's outside the target that we'll move the target to where inflation is. So that's a consideration, is how would you transition to a new target.

Broadly, I think we talk... Well, we talk about a lot of different arguments for higher and lower inflation targets. And the lower inflation target, the arguments for that are usually associated with the costs of positive inflation, which usually come through via the tax system, but also the effects of unanticipated inflation on distributional impacts. And then on the flip side, a high inflation target, some of the arguments there are around creating a bit more space so we don't have to worry about encountering the effective lower bound as frequently. And also there can be some benefits of a higher inflation target, in the sense that if there's a downturn in the economy and you have... Because people's nominal wages don't tend to be cut, it allows a reallocation of labour across sectors and can usually avoid as many people losing their jobs in a downturn, compared to having slightly lower real wages. Not sure I've hit all of the main ones there. Any others, Chris, you would add?

Chris Bloor: Yeah, well I think maybe the underlying premise of the question is around if we get a lot more supply related shocks and inflation becomes a bit more embedded, is that a case for a higher inflation target? And I don't think there's academic consensus on this question yet, and there are arguments in both directions. So were we to get much more imported inflation for example, under the current regime we have to drive the domestic economy a little bit softer in order to get domestic inflation down. And I think there's a real question there about, are you better off trying to generate that lower domestic inflation to offset foreign inflation, or do you want to be able to accommodate some of that higher global inflation? And I think when we look at some of the costs for inflation, we generally think that they relate to the overall level of inflation. And so at the moment we tend to think that probably sticking with our current 2% target is the best thing. But I think this is an area where there is some emerging central bank debate, and this is something we're watching quite closely over the year or two ahead just to see where that consensus gets to.

Georgina Hassell-Hopkinson: Well, just piggybacking off that one, "Why doesn't Reserve Bank aim for 2% inflation straight away and all the time? Why focus on the medium term and what does that mean in practise?

Chris Bloor: So, that's a really good question and it comes to the heart of some of the flexibility, this credibility debate, that we're talking about. So there's always unanticipated things that are hitting the economy. So we can't predict everything that is going to hit us. And a good example is Russia's invasion of Ukraine, which happened largely out of the blue from our point of view and it had a big inflationary impulse. And when we change our official cash rate, it takes 12 to 24 months for that to fully feed through to the economy and to impact on the level of inflation. So when a big event happens, one, it's pretty much impossible for us to then bring inflation down over the next three to six months. It's going to take a period of time. But also were we to respond too aggressively to near term inflation, that will have big impacts on the real economy. So we would likely cause a deep recession as a result of some of these supply shocks, and it's better to try and take some time to bring inflation down so that you don't have the same long lasting impacts on the economy. Anything to add Katy?

Georgina Hassell-Hopkinson: No? Perfect. Well I guess one of the last ones we've got here is, "The Bank of England has..." Oh, I might butcher this one. "Hierarchal objectives of first maintaining price stability and then supporting employment. Is there a strong argument that RBNZ consider such approach?"

Katy Simpson: So, this is definitely something we talk about in the consultation document, and one of the areas that we think is worth considering the Remit could possibly change. I think in most periods, we think actually that ordering, or what we've got at the moment which doesn't have explicit ordering, would actually lead to the Monetary Policy Committee making pretty much the same decisions and leads the same outcomes. Because generally we find that maintaining price stability is the best thing you can do to support maximum sustainable employment. But the document talks through some of the possible advantages of making that a bit more explicit, and then would that perhaps support the credibility of meeting their price stability objective? It's not a really clear cut case because, as we say, it doesn't probably make that much difference in a period of time, but it's definitely something we could consider. I don't know, Chris, if there's anything you wanted to add to that?

Chris Bloor: No, I think that's good.

Georgina Hassell-Hopkinson: Sweet. Well, one last final set of questions. "Is this the last consultation for the Remit Review. When's the last date for submissions? And where can people submit?"

Katy Simpson: Yes, this is the second and last stage of consultation on the Remit Review. It's open, it's an 8 week consultation, so runs until 27th of January, 5pm. If you go onto the Reserve Bank website, there is an online form which has all the consultation questions. So you can fill it in using the form or it's fine to send us an email and you can send your submission that way.

Georgina Hassell-Hopkinson: Great. Well, that's all the questions we've got for today. If you do have any more, feel free to email our Remit Review inbox.

Chris Bloor: Great.

Georgina Hassell-Hopkinson: Pass it back to you guys.

Chris Bloor: Well, thank you very much for joining us today, and we very much welcome any feedback that you provide us through this consultation period. So, thank you for joining.

Paul Conway: Yeah, I second that. Thanks to everybody for tuning in and look forward to your consultations. That was an important topic. And thanks to Chris and Katy for the webinar.



Information from the first round of consultation

Next steps


We want to be confident that the Remit supports decisions that are best for New Zealanders. We will use your feedback to inform the advice we will provide to the Minister of Finance later in 2023.


Paul Conway talks about the Remit Review


Visual: Monetary Policy Remit Consultation text appears on screen.

Visual: Paul Conway stands facing the camera. On screen text says Paul Conway, Chief Economist. Reserve Bank of New Zealand — Te Pūtea Matua. Paul speaks to camera.

Audio: I’m Paul Conway, Chief Economist at Te Pūtea Matua — the Reserve Bank of New Zealand. We’d like to invite you to take part in a consultation where we're asking New Zealanders about the ways in which our Monetary Policy Committee or the MPC makes its decisions.

Audio: So every 6 weeks our MPC sets the official cash rate which has a big impact on interest rates in our economy. Now the legislated aim of these decisions is maintaining price stability and supporting maximum sustainable employment in our economy. The operating guidelines for MPC on how to achieve this purpose are provided to us by government through a remit.

Audio: Now every 5 years the Act requires us to review the remit just to make sure that it's robust and relevant in a changing world. Now this review involves seeking the views of the public which is where you come in.  We want to be confident that we're making the best decisions for all New Zealanders and New Zealand businesses.

Audio: So we want to hear what you think about any changes to the remit to help us achieve our purpose of enabling economic well-being and prosperity for New Zealanders. So tell us what you think.  We've provided a summary guide and some video links below.

Audio: If your time is limited we'd still really appreciate you taking a few minutes to complete the survey and share your views, or if you want to get into the details you can read the full consultation paper and submit your feedback. You'll find all of these resources and links below. Thanks for your time and we look forward to hearing what you think. Ka kite.

Visual: The words have your say with a speech bubble icon appear on screen.