No review as Labour ends bank consensus

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National has brushed off Labour's decision to end 20 years of consensus on monetary policy, saying it has no plans to change the rules and will not buy into a review.

Finance Minister Bill English branded Labour's plans to revisit long-agreed measures for the way the Reserve Bank controls the economy a stunt.

"The previous government had five reviews of the Reserve Bank Act and didn't change it. I suspect that this time round they're just trying to get attention and don't have an alternative either. I think that's just incompetent."

Labour leader Phil Goff yesterday brought an end to 20 years of agreement between the main parties that controlling inflation should be the Reserve Bank's central focus.

He said ending big swings in the value of the dollar should be a major aim, and the review would consider whether the bank should have targets other than inflation.

"We still accept that inflation is a critical factor, in terms of keeping it down to keep the economy going. But we also accept that there are other things that you're looking for, export-led growth, employment and prosperity. We don't think the balance is right at the moment."

Mr Goff said the present rules worked well for the first 10 years after they were introduced in 1989, but not now. High interest rates to combat inflation had fuelled big increases in the value of the dollar, which hurt exporters.

He said Labour had no preferred options for change, and would listen to all suggestions. He refused to rule out controversial policies, including mortgage levies.

But Mr English said the bank's focus on inflation did not need to be changed, as a major factor in high interest and exchange rates had been Labour's spending.

Business NZ chief Phil O'Reilly said ending consensus on monetary policy undermined "international trust in the stability of New Zealand's economic environment".

But the heads of the Manufacturers and Exporters Association and the Council of Trade Unions welcomed the review.

- © Fairfax NZ News