In a statement, Finance Minister Grant Robertson said Reserve Bank governor Adrian Orr has signed a remit to formally set out the RBNZ's objectives. The instruction to maximise sustainable employment is the biggest change to the central bank's mandate in decades.
The move brings New Zealand into step with the US Fed. Robertson said: “This dual mandate is similar to those seen in countries including the US, Australia and Norway, and highlights the importance of monetary policy as a tool to support the real, productive, economy."
Governor Orr has also signed a charter, which will govern the decision-making of the new Monetary Policy Committee. From April 1 law will require the MPC to make monetary policy decisions, such as setting the OCR, rather than the Governor acting alone. The MPC will be made up of 5-7 members.
Orr said: “The MPC Charter also provides for a move to greater transparency, and embracing diverse views. It sets some ground rules for the Committee, ensuring that the decision-making process is effective and transparent, and making it easier to hold the Committee to account for their decisions.”
Robertson said: "When we came into office we immediately started work under the Coalition Agreement between Labour and New Zealand First to review and reform the Reserve Bank Act to reflect the significant changes to our economy and monetary policy practices since the Act was enacted nearly 30 years ago."
He added: "The changes deliver on the first phase of the review of the Reserve Bank act, and have been introduced to improve transparency and "decision-making procedures".