NZ First to insist on changes to central bank act

Relevant offers

Politics

Shake-up heading in EQC's direction Will bill make food safer or be a form of control? Brownlee turns up heat on council over rebuild Agency mulled to run emergency 111 system MPs' travel bills leap during election Remedial work for navy's problem ship Wait for new oil law before awarding permits, Govt urged TVNZ included in police Electoral Act investigation Today in politics: Monday, February 13 Mana activist on mission to Antarctica

NZ First  leader Winston Peters has signalled that changes to the Reserve Bank Act to allow more flexibility in setting interest rates could be a bottom line for his support after the election.

"NZ First will insist the act be amended after the next election - irrespective of who wins it," Mr Peters said yesterday.

He said central bank governor Alan Bollard and his predecessor, Don Brash, had not properly implemented the policy targets agreements, signed by Finance Minister Michael Cullen and by Mr Peters when he was treasurer.

"He's not applying the policy targets agreement, no. You do have to change the act to give it far more force and authority and common sense."

On Wednesday, Associate Finance Minister Trevor Mallard signalled a break with 20 years of consensus by proposing a shift away from interest rates as the sole weapon against inflation.

National finance spokesman Bill English backed the current framework, saying softening the inflation target would ultimately lead to even higher interest rates.

"This is not the time to start tinkering with a monetary framework which is in use worldwide."

Last month he said that, if National won the election, it would not rewrite the policy targets agreements.

Mr Peters yesterday highlighted a new section in the Reserve Bank's statement of intent that said the bank aimed to deepen its understanding of "options for alternative instruments".

Mr Peters said he was encouraged by that, but feared 95,000 jobs would be lost unless it acted soon.

"We advocate a rewrite of the act to enable the governor to take into account the balance of payments, exports, gdp growth and full employment when setting the official cash rate."

The finance and expenditure committee has been investigating options and is expected to report back in the next month. It is considered unlikely to reach a consensus on possible changes.

Mr Mallard has said it was too soon to anticipate the options to be included in Labour's policy.

- © Fairfax NZ News