Graeme Wheeler, named yesterday as the next governor of the Reserve Bank, is less well-known than any appointee since 1989, the year the bank was given statutory independence to provide New Zealand with monetary stability. The governor at that time, Don Brash, had been previously known as an adviser on
Editorial: Bank chief should stick to old target
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Graeme Wheeler. Photo / WORLD BANK
Labour and the Greens suggest "levers" besides interest rates that might be used to stop excessive lending on property when necessary. There is worldwide discussion of ways to prevent financiers creating debts and risk on the scale that caused the global crisis and has left governments with liabilities and deficits that still handicap an international recovery.
Central banks probably do need additional powers to regulate trading bank lending but it does not seem necessary, or wise, to include asset inflation in the next governor's policy targets agreement. A single target, using consumer price inflation, has not prevented the Reserve Bank from taking into account employment, exchange rates, economic growth or anything of economic significance.
Indeed, all of those - and house prices - have been taken into account each time the bank acted to keep the economy on a low-inflation path. Dr Bollard was constantly warning that house prices were overheated and doing his utmost to talk them down. If he had been equipped with better means to deflate that bubble, he would have done so - within his price stability target.
He did not need multiple targets, and nor does his successor.
Fortunately, the bank and the Finance Minister seem to agree a single inflation target is sufficient. Assistant Governor John McDermott praised the present system in a speech last week and yesterday Bill English did not envisage any significant change when he negotiates a target with Mr Wheeler.
Anyone old enough to remember inflation would keep the new governor's eye on price stability. Without it, everything loses value and growth is a mirage.
Let us hope Mr Wheeler remembers.