“No other country in the OECD gives full responsibility for the OCR decision to one person – the Reserve Bank Governor.”
New information released by the Green Party today shows that Treasury has recommended a review of the Reserve Bank’s governance structure.
Reserve Bank minutes and papers released to the Green Party under the Official Information Act show that Treasury has recommended reviewing the Reserve Bank’s reliance on a single decision maker, the Reserve Bank Governor, to set the Official Cash Rate (OCR). The documents also confirm Green Party research that shows New Zealand is the only country in the OECD that puts one person in charge of setting the OCR.†
“No other country in the OECD gives full responsibility for the OCR decision to one person – the Reserve Bank Governor,” said Green Party Co-leader Dr Russel Norman.
“Following a recent internal critique of the Reserve Bank’s governance structure, Treasury has recommended to the Minister of Finance a review of the single decision-maker feature.
“A review of the Reserve Bank’s governance structure is well overdue. This is something I have argued for some time.
“OCR decisions have a significant impact on the New Zealand economy. Having the Governor as the single decision-maker increases the risk that decisions are weighted in a certain direction rather than taking a national perspective.
“I have drafted non-controversial legislation that will introduce best practice at Reserve Bank by making the Reserve Bank Board as a whole accountable for setting the OCR, rather than the Governor alone.”
The draft legislation, in the form of an draft Member’s Bill, also requires the Board to publish its minutes within a fortnight of meeting. As part of the Green Party’s commitment to open and transparent government, Dr Norman has released another tranche of Reserve Bank Board minutes and papers obtained under the Official Information Act.
“My Bill will also require the Bank to release its Board meeting minutes within fourteen days, enhancing the Bank’s transparency and allowing for better public scrutiny of its decisions,” Dr Norman said.
“The UK, US, and Australian central banks all publish their minutes within a fortnight of meeting.
“The minutes detail important economic challenges that the Bank is attempting to address through their monetary policy settings.
“Increased transparency will result in stronger financial markets and a more resilient economy.”
Dr Norman has invited public feedback on his draft legislation.
† The Reserve Bank cite Canada as also having a single decision-maker however the Bank of Canada also requires the Governing Council to come to a consensus on the OCR.