In November 2017 the Government announced it would undertake a review of the Reserve Bank of New Zealand Act 1989 to create a modern monetary and financial policy framework.
The Review will ensure the Reserve Bank’s monetary and financial policy frameworks still provide the most efficient and effective model for New Zealand.
The Review is split into two phases. The terms of reference for phase 1 and the scoping of phase 2 of the Review can be found below.
Phase 1 is focused on adding employment to the price stability objective of the Bank and providing for a committee decision-making model for monetary policy decisions.
Phase 2, in line with the Government’s coalition agreement to review and reform the Reserve Bank Act, will take a look at a range of issues. Officials from the Reserve Bank and the Treasury are now working with the Independent Expert Advisory Panel to provide advice on the issues to be included in phase 2 of the Review.
The review process includes opportunities for the public to make submissions on the issues under consideration (see below).
Phase 1 - Policy decisions announced on 26 March 2018
Policy decisions on phase 1 of the Review were announced on 26 March 2018 alongside the signing of the Policy Targets Agreement (PTA) by Hon Grant Robertson and Adrian Orr. Advice on the 2018 PTA can be found here.
The key decisions that have been made by Cabinet under phase 1 are:
- To include supporting maximum sustainable employment alongside price stability as an objective of monetary policy in the Act.
- To require that monetary policy decisions be made by a Monetary Policy Committee (MPC) of 5-7 members that includes a minority of external members.
- The MPC will take decisions by consensus where possible, but publish records of meetings that outline differences when they exist and the balance of votes where consensus is not reached
- Members of the MPC will be appointed by the Minister of Finance following a nomination of the Reserve Bank Board, with the Reserve Bank Governor and Deputy Chief Executive being members by virtue of their positions in the Bank. The Governor will be the chair of the MPC.
- The Reserve Bank will retain operational independence.
A number of consequential amendments are necessitated by these changes, including some changes to the duties of the Reserve Bank Board, the role of the Governor, and the mechanism to set the policy target for monetary policy.
A graphic summary of the phase 1 decisions can be found below.
The documents relating to policy decisions on phase 1 of the Review include:
- Cabinet paper - “Modernising New Zealand’s Monetary Policy Framework: Phase One”
- The Treasury’s Regulatory Impact Statement
- Independent Expert Advisory Panel report to the Minister of Finance on phase 1 of the Review
A Bill to progress the policy elements of phase 1 of the Review will be introduced later this year. The MPC will begin operation in 2019.
Phase 2 – Expert Panel to advise the Government shortly
The Panel is due to give the Minister of Finance its recommendations for the scope of Phase 2 of the Review shortly. Announcements on this will be made in the coming months. Subsequent policy work will commence in the second half of 2018.
In the initial announcement of the Review, the Government confirmed that phase 2 would incorporate the review of the macro-prudential framework that was already scheduled for 2018.
Independent Expert Advisory Panel
In December 2017, an Independent Expert Advisory Panel was appointed by the Minister of Finance. The Terms of Engagement released following the announcement of the Review can be found below.
The Panel has concluded its report on phase 1 and will advise on the scoping of phase 2 of the Review with the support of the Treasury and the Reserve Bank.
The members of the Panel are:
- Suzanne Snively ONZM (Chair): a former Director of the Reserve Bank of New Zealand, Suzanne is an independent economic strategist, professional director and risk management advisor. She is the Chair of Transparency International New Zealand and a director on boards including the Health Research Council, the Army Leadership Board and Te Pou Matakana.
- Dr Malcolm Edey: Malcolm is a consulting economist and academic, lecturing in economic policy, banking and finance at the University of Sydney. Previous roles include Assistant Governor (Financial System) and Assistant Governor (Economic) of the Reserve Bank of Australia, and Chair of the OECD Committee on Financial Markets.
- Dr Girol Karacaoglu: Girol is the Head of the School of Government at Victoria University of Wellington with a focus on research in public policy. He was previously Chief Economist and Deputy Secretary, Macroeconomics, International and Economic Research at the Treasury, and was Chief Executive of The Co-operative Bank for nine years.
Proactive release of papers provided to the Panel
The Treasury has made public a number of the background papers that were provided to the Panel to inform their discussions.
Panel meeting papers
The papers discussed at the Panel meetings on phase 1 can be found here.
Information relating to the panel meetings in which the Panel discussed phase 2 issues will be released after the Government has announced decisions on the scope of phase 2.
The Reserve Bank is an important economic institution. As such, the Review of the Reserve Bank of New Zealand Act 1989 is of public interest and may affect a range of stakeholders. The Review will be managed in an open and transparent manner, with multiple opportunities for public input.
Public consultation on phase 1 – monetary policy
The Treasury received a number of submissions and held a targeted series of industry and stakeholder round tables on phase 1 matters prior to Cabinet decisions being made. A summary of the views expressed in these meetings and in the written submissions can be found here, along with all written submissions.
There will be further opportunities to have your say, including during the select committee process for the Reserve Bank Amendment Bill. The select committee process will likely be in the second half of 2018.
Further submissions on detailed design issues relating to Cabinet decisions may be submitted to email@example.com by 10 April 2018.
Public consultation on the scope of phase 2 – financial stability and other policy
Submissions on the scoping of phase 2 closed on 9 March 2018.
A series of industry round tables and stakeholder consultations have also been completed.
The written submissions, and a summary of the round tables and consultations will be released once decisions have been made on the scope of phase 2.
Officials from the Reserve Bank and the Treasury are working with the Independent Expert Advisory Panel to provide advice on the issues to be considered in phase 2 of the Review.
Once the terms of reference for phase 2 has been determined, officials will continue to work closely with a range of stakeholders. There will be further opportunities to provide submissions on policy issues and draft legislation once phase 2 is underway.
Please note that if you have already made a written submission, this will be made public unless you indicate you would like all or part of your submission to remain confidential. If you would like part of your submission to remain confidential, then please provide a second version of your submission that indicates what parts you want to withhold to: firstname.lastname@example.org.
If an Official Information Act request is made to the Treasury, the Treasury will make an assessment as to what must be released or withheld in accordance with the Official Information Act 1982.
For general enquiries about the Reserve Bank of New Zealand Act Review, please email email@example.com. The Treasury will respond to enquiries made through this channel as part of its role as the secretariat for the Review.
All media enquiries should be directed to firstname.lastname@example.org.