Reserve Bank issues Statement of Intent

Release date
30 June 2008

The Reserve Bank has released its Statement of Intent (SOI) for 2008-2011. Reserve Bank Governor Alan Bollard said the SOI has been written in a period of considerable uncertainty in the outlook for the economy.

"Over the last six months or so, economic activity has slowed down markedly, while inflationary pressures, especially in fuel and food prices, have continued to strengthen," Dr Bollard said.

Since August 2007, the financial system has withstood a severe test of global financial markets, triggered initially by losses in the US sub-prime mortgage market. The IMF has described unfolding events as the largest financial shock since the Great Depression.

"The adjustment process might prove to be protracted. Further volatility in world equity markets, exchange rates, and debt markets is likely," Dr Bollard said. "In this environment, a key strategic priority for the Bank is to strengthen its prudential liquidity policy for banks."

Dr Bollard said the Bank is also implementing the new regulatory arrangements for non-bank deposit-takers and the insurance sector. A variation to the Bank's current five-year funding agreement has been approved by Government to ensure suitably qualified staff can be recruited to implement and administer the new arrangements.

At the same time, the Bank will ensure its management and systems continue to provide good support for its monetary and financial stability policy roles. A new econometric model is being introduced into the monetary policy and forecasting process and an integrated computer application is being built for collecting financial sector statistics.

The Bank's SOI includes new ‘Key Performance Indicators' for the Bank, identifying the main non-financial measures and standards by which the performance of the Bank can be judged. "These indicators will evolve as we gain experience in how to use them," he said.

"Overall, this SOI reflects a strategic approach to ensuring the Bank's ability to maintain stability in an uncertain environment," Dr Bollard said.

Media contact:
Mike Hannah
Head of Communications
Ph 04 4713671, 021 497418, mike.hannah@rbnz.govt.nz