Making at the Reserve Bank of New Zealand Professor Neil Quigley - - PDF document

Governance and Decision- Making at the Reserve Bank

• f New Zealand

Professor Neil Quigley

Vice-Chancellor University of Waikato 3 July 2018

Go Gover erna nanc nce e And And Decision Decision-Mak Making ing Unde Under t r the he C Cur urren ent Act t Act

• Single decision-maker
• Meet the requirements of the Act - stability in

prices and financial system

• Policy Targets Agreement
• Board keeps the Governor and Bank “under

constant review”

• Double veto appointment of Governor

Wha hat is t is Wr Wrong with the

• ng with the

Cur Current Act? ent Act?

• It is not 1989 any more
• Lack of clarity
• Can be challenging because all aspects of Reserve

Bank operations governed by the Act

• Benefits of formalising committee decision-

making

• Role of Board unclear

The P he Path T th To

• a R

a Review view of

• f

the Act the Act

• The benefits of a review discussed for some

time – but concerns about “opening up” the Act

• Minister English “Letter of Expectations”
• Rennie review for Treasury (Minister Joyce)
• Post-election decision to move forward with

Review in two phases

Phase Phase 1 1 Review view Decisions Decisions

• Policy Targets Agreements “maintaining

stability in the general level of prices over the medium term and supporting maximum sustainable employment”

• Monetary Policy Committee chaired by the

Governor – up to 4 Bank staff and 3 externals. Non-voting Treasury member

• Appointment of MPC members by Minister on

recommendation of Board

Purpose of the Reserve Bank Act To promote the prosperity and wellbeing of the people of New Zealand and contribute to a sustainable and productive economy

Internal members

Governor and Deputy Chief Executive ex-officio members, Governor as Chair, casting vote if required 5-year terms (staggered) Max 2 terms in one role Full-time

External members

Non-Bank staff with relevant knowledge and experience 4-year terms (staggered) Max 2 terms Part-time

Non-voting Treasury observer Reserve Bank Board

Minister of Finance appoints Board and determines Chair and Deputy Chair Board responsible for monitoring performance of the PMC and its individual members in their duties

The MPC and Minister of Finance to agree a Charter setting out the approach to issues defined in the Act, including the approach to its work and communications. Details of the first Charter are yet to be determined, but its is the Minister’s intention that:

• The MPC aims to reach decision by consensus
• Non-attributed votes are published where there is not consensus
• Non-attributed records of meeting that reflect any differences of view are published

Monetary Policy Committee (MPC) responsible for formulating monetary policy

7 voting members (the Act will allow 5 to 7), majority internal members All members to be nominated by the Reserve Bank Board, appointed by the Minister of Finance

Questions