Reserve Bank of New Zealand
Press Release
6 April 2006
Report on supplementary tools released
The Reserve Bank and the Treasury today released a joint report (www.rbnz.govt.nz/monpol/about/) on possible additional
instruments to supplement the role of interest rates in managing demand pressures and inflation.
This report, prepared under terms of reference (www.rbnz.govt.nz/monpol/about) issued in November 2005, was prompted by
the recent strength and persistence of domestic household demand, the scale of the accompanying external imbalances, and
the key role played by the house price cycle.
In calling for this report, it was considered that, if additional non-interest rate instruments were available to more
directly target the housing sector, they might alleviate some of the pressures on the exchange rate and the traded goods
sector. Such instruments would be structured so that they would be relevant for use in any future period of cyclical
housing pressure, said Reserve Bank Governor, Alan Bollard, and Secretary to the Treasury, John Whitehead, in a joint
statement.
"The report considered a range of possible additional instruments. It concludes that there are no simple, or readily
implemented, options that would provide large payoffs in the near-term, without significant complications and costs, but
there are some areas in which further work may be appropriate. These will be picked up in the course of ongoing work on
macroeconomic policy.
"We remain interested in the possibility that additional discretionary instruments, including ones not directly related
to the housing sector, might be able to mitigate the impact on the tradables sector of cycles in domestic demand, but
further work in this area is not a high priority for us at present."
The report was prepared by a joint team of Treasury and Reserve Bank officials for the Governor and the Secretary, who
then made recommendations to the Minister of Finance. Also released today is the letter (www.rbnz.govt.nz/monpol/about)
provided by the Governor and Secretary to the Minister of Finance.
ENDS