David
PARKER
Spokesperson for Finance
6 December 2012 MEDIA STATEMENT
About time: A Small Chink In Monetary Orthodoxy
Reserve Bank Governor Graeme Wheeler’s admission today that he is negotiating the use of macro-prudential tools shows
the Government is finally conceding that its orthodox monetary policy needs to change, says Labour’s Finance
spokesperson David Parker.
“For years National has defended its orthodox monetary policy as ‘world’s best practice’. But the world has moved on
since the financial crisis and the old orthodoxies are changing.
“National now finally appears ready to consider some changes. It’s about time too.
“This move is partly due to pressure from opposition parties, including three years of agitation by Labour.
“Graeme Wheeler said today that the Reserve Bank and the Government are negotiating a new memorandum of understanding
that would include macro-prudential tools, such as loan-to-value ratios, to lean against asset bubbles and reduce
reliance on the interest rate lever.
“The Government has decried changes to its monetary policy – one of the most orthodox in the world – as voodoo
economics. This is despite a chorus of calls for change from exporters, businesses, opposition parties and some
economists.
“Now, belatedly, it appears to have recognised that the world has moved on.
“These changes are far from all that is necessary. The biggest problem is still the primacy given to inflation
targeting ahead of other important matters of economic management like employment and the exchange rate.
“Changes are needed to the Reserve Bank Act to ensure the Bank can give proper weight to these other matters which are
crucial to exports and jobs.”
ENDS