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Summary
- RBNZ provided Statement of Intent 2021-2024 on June 29.
- Economic activity in NZ returned to pre-COVID-19 levels.
- However, there are still vulnerabilities with more monetary and fiscal support needed for the recovery process.
RBNZ released its Statement of Intent for 2021-2024 on Tuesday, summarising main priorities of the bank as the guardian of the NZ financial system. The central bank expressed its delight to see the country’s economic growth returning to pre-coronavirus levels, supported by continued positive domestic health results, improved global demand and greater pricing for New Zealand's goods and exports.
Further, NZ is also witnessing high employment growth propelled by a rebound in consumer spending and building activity and aided by significant monetary and fiscal stimulus.
ALSO READ: Is New Zealand’s economy on the right track? Should Australia follow in NZ footsteps?
However, there are still vulnerabilities and the economic recovery needs continued monetary and fiscal support, stated RBNZ Governor Adrian Orr and Deputy Governor Geoff Bascand.
Image Source: Copyright © 2021 Kalkine Media
New Zealand's victory in practically eradicating coronavirus enabled it to restart its domestic economy much before other advanced nations, generating jobs and consumer expenditure. The country also avoided slipping into second pandemic-induced recession and reported much stronger-than-expected GDP numbers for the March quarter of 2021.
After it hinted a hike in OCR next year, RBNZ was also one of the first central banks to signal a move away from stimulatory monetary policy settings adopted during the COVID-19 pandemic. After suggesting an increase in OCR next year, the RBNZ was also one of the first central banks in the world to signal a shift away from the stimulatory monetary policy settings used during the COVID-19 pandemic.
RBNZ on a road to its transformation
RBNZ stated that as soon as COVID-19 was controlled and the global and economic recovery was maintained, economic policy conditions were likely to normalise over the medium term. The bank is also mindful of keeping low and stable CPI, adding to the maximum sustainable employment while maintaining a sound financial system.
ALSO READ: Can rising inflation derail recovering global economy?
In the coming years, the Reserve Bank will go through substantial legislative changes that will change the way it operates and oversee the financial system, Orr added. He added that the bank was also getting ready to execute the new Reserve Bank of New Zealand Act, which is a big component of its reform and includes a new statutory governance board, which will start in 2022. It will be further enactment of the new Deposit Takers Act.
RBNZ is also taking action to alleviate risks from climate change to financial stability, reviewing its corporate policies and building an overall capability for the future.
