Same objectives, different challenges

Release date
02 September 2020

The Reserve Bank’s goals of monetary and financial stability, and team values and capabilities, put it in good stead to manage the evolving economic consequences of the global COVID-19 pandemic.

“There is no precedent for an economic shock of this nature in peoples’ living memory. It is assuring that during such uncertain times people can have confidence in New Zealand’s monetary and financial system,” said Reserve Bank Governor Adrian Orr in a speech delivered to the Victoria University School of Government and Policy Studies.

“Our policy goals are highly relevant, and our strategies to achieve them will evolve with the circumstances.”

“Our key early actions included a significant easing in the Official Cash Rate (OCR), the introduction of Large Scale Asset Purchases (LSAPs), and the provision of plentiful and cheap liquidity for the banking system. We have been effective in lowering interest rates across the board, and ensuring there is plentiful liquidity in the financial system.

“We are actively preparing a package of additional monetary policy tools to use if needed. This is to ensure that monetary policy will remain effective and operate without undue risk. The additional tools that could be deployed include, for example, negative wholesale interest rates, further quantitative easing, direct lending to banks, and ongoing forward guidance about our intentions.”

“Some of these tools are unfamiliar to many New Zealanders, but they are used widely internationally. We aim to ensure our tool kit is best suited for the job here in New Zealand,” Mr Orr said.

“Now more than ever, financial institutions need to contribute to New Zealand’s economic success. We need banks to use their risk models, and capital and liquidity headroom, to support their customers’ best long-term interests. Banks need to make the appropriate risk-reward decisions that endure over time. This is being courageous.”

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Media contact:

Oliver Bates
Manager, External Stakeholders
DDI: +64 4 474 8627
Email: Oliver.Bates@rbnz.govt.nz