Bollard departure sparks call for policy change

The announcement of Reserve Bank Governor Alan Bollard's departure has sparked a call for monetary policy change among economists and analysts.

Allan Bollard yesterday announced he would step down from his role as the Reserve Bank Governor in September, marking the end of a decade in the role.

Business and Economic Research Limited (BERL) chief economist Ganesh Nana told Radio New Zealand Mr Bollard's departure was an opportunity to shake up the monetary policy.

"The job should not be isolated from the broader role of managing and governing a sophisticated modern day economy and unfortunately just focusing on one target for one person isolates and puts monetary policy in a silo.''

He said the governor needed to be "actively involved'' in all avenues of economic policy setting.

"The focus needs to be for the whole group, on the prosperity of the New Zealand economy, and in particular it's imbalances, whether they be external and internal.''

He said the Government should be involved in, but not drive or control, the macro economy as it is doing now. The Government should instead play a stronger role in managing the economy.

Mr Nana said the country should look to countries such as Singapore and Switzerland for inspiration, as the current practice of controlling inflation before waiting for everything else to "fall into place'' was not working.

Currency market analyst Derek Rankin suggested a committee of four or five people to vote on the Official Cash rate, to take the pressure off a single person, as international counterparts do.

However former Reserve Bank Governor Don Brash said expanding the role would be a mistake, and the Government should focus on keeping inflation low.

"I say why would you change something which is clearly working very well indeed.''

Dr Brash cited low inflation, one of the lowest unemployment rates in the developed world, and said exchange rate volatility had been no more pronounced than other countries.

He said the framework had been reviewed last decade at the request of former Prime Minister and Labour leader Helen Clark, and it was decided that no changes were necessary.

He said he was glad the Government showed no sign of widening the role's brief.

Don Brash told Newstalk ZB this morning there is plenty of local talent to fill Dr Bollard's shoes.

He said he could immediately think of five New Zealanders who would be admirable replacements, "starting of course with the Deputy Governor, Grant Spencer.''


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