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

Governance and Decision- Making at the Reserve Bank of 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 ong 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 o a R a Review view of of 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 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 Internal members Governor and Deputy Chief Executive Non-voting ex-officio members, Governor as Chair, Treasury observer casting vote if required 5-year terms (staggered) Max 2 terms in one role Full-time Reserve Bank Board Minister of Finance appoints External members Board and determines Chair and Non-Bank staff with relevant Deputy Chair knowledge and experience Board responsible for monitoring 4-year terms (staggered) performance of the PMC and its Max 2 terms individual members in their duties Part-time 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

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