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Monetary Policy: Same Objectives Different Challenges

Adrian Orr

Speech delivered to the Victoria University of Wellington School of Government

On 2 September 2020

By Adrian Orr, Governor

With special thanks to colleagues Omar Aziz, Cameron Haworth, and Joseph Weller


Tēnā koutou katoa, welcome everybody.

Today I want to outline how the Reserve Bank of New Zealand – Te Pūtea Matua – is working to maximise the effectiveness of its actions in the face of the global COVID-19 pandemic.

While we all hope the health implications of the virus will be as short-lived as possible, it is clear that the economic implications will be severe and long-lasting. It is during such unsettling times that public confidence in our financial system matters most.

I want to assure people that the goals of the Bank remain the same, as set in legislation. Our purpose is to ensure public confidence in the financial system, and to minimise the economic vulnerability of New Zealand through a sound and dynamic monetary and financial system.

I also want to assure people that the Bank’s core values – integrity, innovation, and inclusion – remain our bedrock and continue to assist greatly in managing ongoing changing economic times. To succeed we continue to exercise sound judgement and work collaboratively to be most effective. And, consistent with our value of innovation, the Bank’s activities, capability, and capacity continue to evolve with the circumstances.

During these times of COVID-19 our values have ensured Te Pūtea Matua has been able to respond effectively to the many new – sometimes unprecedented – economic challenges. We have been able to, for example:

  • Exercise decision making under extreme economic uncertainty, using a least regrets approach for the current context;
  • Collaborate with the Government, our regulator colleagues, and our regulated institutions, to prioritise actions, coordinate and communicate policy decisions, and urgently implement agreed actions;
  • Review our strategies and the tools available to implement monetary policy in the most effective and efficient manner, in full line of sight of any different risks that we may need to manage or mitigate; and
  • Test our understanding of the interaction between our monetary policy goals – of low inflation and contributing to maximum sustainable employment – and our financial stability and efficiency goals. These goals remain mutually supportive.

Since the beginning of this pandemic, and to the full extent of our mandate and capabilities, we have helped to cushion the initial economic blow delivered by the COVID-19 virus. Our initial actions have been focused on promoting cash flow and confidence in the financial system. We have also acted to maintain monetary and financial stability, and provide broad support to the Government, financial institutions, and the people of New Zealand.

However, it is early days. The duration of this economic challenge will only be decided by the virus and its containment. Hence, we are now well in the groove of ensuring we maintain our policy effectiveness as the nature and scale of the economic challenge unfolds.

As always:

  • Our goal is to achieve our policy objectives subject to no undue risk.
  • How we achieve our policy objectives – our strategies – will evolve appropriately with the economic circumstances. And,
  • We continue to ensure that any necessary risks we must accept to achieve our goals are well identified, appropriate, and managed.

People can remain confident in New Zealand’s financial system knowing that we are acting in their best long-term interests. Ahead, I will provide a sense of the operating environment the Bank has been confronted with in recent months and how our strategies are evolving to maximise our effectiveness.