Some Policy Lessons from a Year of COVID-19

The Reserve Bank of New Zealand – Te Pūtea Matua was in a sound position to continue to meet its mandate in the face of the COVID-19 induced economic shock. However, we must continue to transform so as to remain relevant and effective in addressing longer-term challenges, Reserve Bank Governor Adrian Orr said.

In a speech delivered today at the 2021 New Zealand Economics Forum hosted by the University of Waikato, Mr Orr noted that one of the main lessons re-emphasised over recent months is the power of monetary and fiscal policies working hand in hand to manage tough times.

“I am very proud that Te Pūtea Matua has been able to assist in the whole of government effort to develop, implement, and support a broad range of policy responses to the COVID-19 economic shock,” Mr Orr said.

Mr Orr said there is still heightened health-related economic uncertainty, and hence we must continue working together. “Working together – mahi tahi – is a critical catchphrase as it recognises that no one individual, enterprise, or policy institution can succeed alone,” Mr Orr said.

Mr Orr welcomed the opportunity for ‘mahi tahi’ that the Government’s recent directive brings. The Government has requested that the Bank has specific regard to house price sustainability when assessing its financial stability settings. These settings include, for example, Loan to Value Restrictions, and broader bank capital and lending requirements.

“We will work in collaboration with a broad range of policy, private sector, and other non-government organisations, to understand how we can support sustainable house prices. This goal is consistent with our financial stability mandate, to promote a sound and efficient financial system, and hence avoid undue financial risk. The multifaceted nature of the housing market necessitates a multipronged response.”

“Importantly, the Monetary Policy Committee’s remit remains unchanged, that is, solely focussed on maintaining low and stable consumer price inflation and contributing to maximum sustainable employment, as outlined in our recent Monetary Policy Statement.”

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