A Former RBNZ Chair savages the RBNZ's conduct of Monetary Policy
Former Reserve Bank Chair of the Board, Arthur Grimes, has mounted a quite extraordinary attack on the Labour government for changing the Reserve Bank's aim from price stability (called "the single mandate") to both price stability and maximum sustainable employment (called the "dual mandate"). In most countries, his comments would have resulted in front page news headlines. Here they seem to have gone largely unnoticed in the mainstream media. Arthur blames the change in the mandate for runaway house price inflation. And he's positively fuming:
"the current Labour Government .. widened the [Reserve Bank] act to include a new task .. to achieve 'maximum sustainable employment' in addition to its price-stability mandate. The amended act came into force in December 2018 .. Monetary policy under the amended Reserve Bank Act has lived up to predictions: it has sparked huge increases in the wealth of property owners .. The central culprit has been monetary policy that has flooded the economy with liquidity. This liquidity in turn has found its way into the housing market .. In well-being terms, the country is immeasurably poorer as a result of the vast wealth gulf that has emerged since 2018. And no politician seems to care enough to do anything about it".
If you want a good understanding of the difficulty of implementing the RBNZ's dual mandate, which is shared by the US Federal Reserve, then there's no better video in the world to watch than the one below (by the way, the Kiwi equivalent of the "central banker" cowboy in the video is our own Adrian Orr):