The Minister of Finance has agreed with the Reserve Bank Governor a new five-year funding agreement which will ensure Te Pūtea Matua (the Reserve Bank of New Zealand) has adequate resources to meet its increasing responsibilities and the expectations of New Zealanders.
“The new funding will enable us to invest in the capability and capacity of our team, and ensure our systems are robust and effective to support our vision of ‘Great Team, Best Central Bank’,” Reserve Bank Governor Adrian Orr said.
Unlike other Government agencies that seek funding through the annual budget process, the Reserve Bank makes money for the Crown through its balance sheet activities. Under the Reserve Bank Act, the Minister of Finance and the Governor enter into a five-year Funding Agreement – an important instrument for maintaining the Bank’s operational autonomy, in that it provides multi-year funding and specifies the amount of revenue the Bank may retain to fund its operations.
The new agreement will provide the Bank with an annual average of $115 million a year for its operations over the next five years, with a further average of $13 million a year for the issuance of currency. The 2019/20 budget total was $80 million.
Mr Orr says it is a substantial and important increase, which means the Bank can address the critical risks to delivering its mandate, respond to areas of past underinvestment, and establish a long-term model to promote the wellbeing of New Zealand.
The bulk of this increased spending will focus on expanding and enhancing the Bank’s core activities, particularly investing in financial supervisory and enforcement capability, as recommended by the International Monetary Fund’s 2017 Financial Sector Assessment Programme (FSAP) Review.
Spending will also be directed towards supporting the Bank’s day-to-day operations and investing in the upkeep of its assets. This includes modernising the technology infrastructure and keeping security architecture up to date, designing a suitable vaulting and distribution system for cash, and expanding our reach to stakeholders in Auckland.
Implementing and preparing for changes to our governing legislation is another key priority. The Bank’s future legislation will bring a number of changes to how it operates and significantly enhance the Bank’s policy frameworks and governance settings.
“As we focus on the immediate economic challenges brought about by the impact of COVID-19, it is equally important we look for long-term opportunities presented by the recovery. The funding agreement will enable us to achieve a wide range of initiatives, as part of our commitment to be better kaitiaki (guardians) of our financial system. We are committed to managing our resources effectively and measuring our delivery on the priorities we’ve set,” Mr Orr said.