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Former Finance Minister Steven Joyce has supported calls for the government to control the Reserve Bank.
Joyce rejected Prime Minister Jacinda Ardern’s criticism that such interventions were financially reckless and said the government had the right to inform the Reserve Bank when it was acting out of place.
“It is not true that the Reserve Bank is the sole arbiter of economic policy in New Zealand,” Joyce said.
Instead, he said, the government should help the bank shore up economic growth by reducing minimum wage increases and things like additional sick leave.
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He said those policies put pressure on businesses and depress economic growth, forcing the bank to do more to keep the economy moving.
This means lower interest rates and more people borrow more cheap money to enter the housing market.
His comments come to the end of a fierce political debate over the government’s lack of control over house prices and the best way to prop up a struggling economy.
This week, National’s new shadow treasurer Andrew Bayly said the government should tell the Reserve Bank to do more to stop runaway house prices. This was due to the bank’s decision to print cheap funds worth $ 28 billion to give to banks.
It is assumed that most of that will likely end up in the already overheated housing market, a widely held view. Even former Labor finance minister Michael Cullen believes the stimulus from the Reserve Bank has been misdirected.
Bayly said Finance Minister Grant Robertson should ask the bank to direct some of that financing to the productive side of the economy: businesses that create jobs and productivity.
Cameron Burnell / Stuff
Steven Joyce has backed a call for control of the Reserve Bank.
Joyce agreed.
“The Finance Minister has the right to make those statements,” said Joyce.
He said the government should not tell the Reserve Bank how to set interest rates, but that it had the right to put the bank on the line if its monetary policy undermined broader economic goals.
“The Reserve Bank has a very broad vision of its independence. Their independence is related to monetary policy and as its scope has slipped from the current government to the issue of employment, with which I do not agree, they are adopting a very broad vision of their independence, ”said Joyce.
This mandate gave the bank the responsibility of ensuring maximum sustainable employment and ensuring that inflation was kept under control. The move was controversial in some circles.
“The last thing you would want is for the government to intervene around interest rates, but as the Reserve Bank’s mandate continues to grow, it is not true that the Reserve Bank is the sole arbiter of economic policy in New Zealand.
Joyce said the bank has been wielding most of the burden when it comes to propping up the economy during the current crisis. He said that if the government did more to encourage growth on its side of the equation, the bank could afford to cut its ultra-low interest rates and money printing.
In total, the bank could create $ 128 billion of printed money by the time its stimulus programs end.
“Both the Reserve Bank and the government expect monetary policy to do too much,” Joyce said.
He suggested two things: letting people cross the border slowly and easing wage increases and changes in labor laws.
“The higher wage agenda – and I would call it the rising unemployment agenda – constantly increasing the minimum wage, additional sick leave and vacation pay; All of these things have merit in themselves, but they add to the business costs of hiring people, ”Joyce said.
Because the Reserve Bank is now obliged by law to do everything possible to boost employment, the bank was faced with compensating for government policies.
