Central bank governor to get 'mates' under Labour monetary policy rejig

Reserve Bank Governor Graeme Wheeler. A Labour government would end the Reserve Bank governor's 'single decision-maker' power. Photo / Mark Mitchell

A Labour Party-led government would end the Reserve Bank governor's 'single decision-maker' power over monetary policy settings, moving to a system more akin to that used in Australia and other countries, with decision-making by committee and involving external experts.

Labour's finance spokesman, Grant Robertson, confirmed the long-expected move yesterday morning and reaffirmed Labour's intention to make the central bank focus as much on unemployment rates as the inflation rate in setting monetary policy.

"In 2014, inflation was low but unemployment was still high," he said yesterday in an interview with TVNZ's Q&A programme under questioning about the fact that unemployment is already low. "They might have lowered rather than increased interest rates at that time," he said.

Robertson said the current system, which sees the final decision on interest rate changes rest solely with the Reserve Bank governor, was "out of step with international practice".

"We propose that the existing governing committee of the Reserve Bank be joined by three independent experts. We would expect them to make a substantial time commitment to this work. The appointment of the experts would remain in the hands of the governor, in consultation with the Minister of Finance, though would be subject to scrutiny as part of the finance and expenditure (select committee)'s review of the bank.

"To help sustain public confidence in the system, we are proposing putting the minutes of each meeting of the committee online within three weeks, including the result of any vote," said Robertson. "This is done in a number of other jurisdictions. It is important that a public institution making as important decisions like the Reserve Bank, has this level of public transparency."

"The RBNZ Board would still have retrospective oversight of the committee's decisions, and would hold it to account for any systematic errors or omissions."

The current governor, Graeme Wheeler, has been at pains to stress that while he is nominally the 'sole decision-maker' on changes to the Official Cash Rate, the practical reality of the current system is that he takes advice from a range of advisers already.

In the Q&A interview, Robertson also foreshadowed announcements yet to come that would bolster rights to collective bargaining for wage agreements.

"We're the Labour Party, we're about making sure people get a fair deal in the workplace. It's about a balance," he said, with an announcement due on labour market policy late in election year.

Meanwhile, Finance Minister Steven Joyce late last week also announced a review of current monetary policy decision-making, to be conducted by the former head of the State Services Commission, Iain Rennie.