This blog disagrees with ACT leader's David Seymour's views on the Reserve Bank. Has he just come in fresh from a talk with Don Brash? And together concluded that the whole show should be returned to what was in place when the Reserve Bank of NZ Act was passed in 1989? Maybe Don Brash could apply to be the new governor to implement Seymour's new legislation when Adrian Orr's tenure comes to an end? Give us a break.
The conduct of monetary policy these past 6 years has little to do with changes in legislation. For goodness sakes, our dual mandate is the same as a country called .. the United States. When Labour was determined to change the original legislation, I advised them that the best way of doing so in order to avoid the bonkers proposals that they were considering at the time, was simply to adopt the US Federal Reserve's approach. Which they did.
So what has gone wrong these past years? In Central Banking circles, there is recognition that not only do laws and rules affect the conduct of such policy, but discretion also plays a huge role. The reason for our bungled monetary policy (like printing $50 billion of cash, fueling rampant inflation and causing mortgage pain) comes down to the personal descretionary decisions of Governor Orr. They were his choices - the Monetary Policy Committee is nothing but a puppet - and the decisions would have been the same regardless of the legislation Orr was operating under.
Even under the old Reserve Bank of NZ 1989 Act, Orr still would have had huge discretionary powers to adopt exactly the same monetary policy that he has done these past six years.