KEY POINTS:
A polite ripple of applause rather than three rousing cheers has greeted the news that Alan Bollard has been reappointed for another five years as governor of the Reserve Bank.
The scorecard for Bollard's tenure so far is very much an "on the one hand ... but on the other" affair.
He is given credit for something he has not done. He has not derailed what is now the longest economic expansion since the 1960s.
That is very much in keeping with the give-growth-a-go tenor of the changes to the policy targets agreement he agreed with Finance Minister Michael Cullen when he was appointed in 2002.
But on the other hand his primary mandate is to keep inflation within the 1 to 3 per cent band on average over the medium term. By this measure he barely scrapes in.
Over the past three years (the outcomes before that reflect the policy calls of Rod Carr and Don Brash) annual CPI inflation has averaged 2.98 per cent. Inflation expectations have drifted upwards.
Bank of New Zealand chief economist Tony Alexander doesn't think Bollard has run monetary policy as well as he might have - and in this he agrees with a majority of chief executives polled in the Herald's Mood of the Boardroom survey.
"The Reserve Bank have underestimated the factors insulating growth in the economy, they have underestimated the deficiency of resources in the economy and they have overestimated the underlying rate of productivity growth, and therefore they have run too easy a monetary policy," he says.
To which Bollard might reply that if he had taken the advice of the majority of analysts - Alexander excluded - he would have cut the official cash rate long before now and the inflation pressures he still has to deal with would be even stronger.
Bollard has had to contend with a step up in households' willingness to take on debt, at a time when banks have been able to to tap a world awash with cheap money and have been willing to sacrifice their margins in a battle for market share.
In particular an inverted yield curve - with lower interest rates for longer maturities than for short ones - has encouraged a shift from floating to fixed-rate mortgages. That has made the lag with which local monetary policy moves work longer than ever and increased the risks involved in a wait-and-see approach.
Bollard has also had some terms of trade shocks to contend with including a steep rise in oil prices and more recently a surge in dairy prices.
Exporters struggling to cope with a dollar which has spent most of the past 2 1/2 years above US70c are likely to be less understanding, however.
Their pain is why Parliament's finance committee is about to begin an inquiry into monetary policy and the factors which have made it such a hard slog in recent years, including sluggish productivity growth.
An appointment or reappointment to the Governor's $500,000-a-year job is one of the occasions on which his riding instructions, the policy targets agreement, can be renegotiated.
Cullen and Bollard said yesterday the PTA they agreed in 2002 had been renewed unchanged, but could be amended if anything arose from the committee inquiry that changed their understanding of what the appropriate targets and mechanism for the operation of monetary policy are.
