The New Zealand Herald editorial, "Labour should leave the Reserve Bank alone", contains a number of inaccuracies.
As I said in a well-attended and reported speech when I launched the policy in April, we are not proposing the Reserve Bank be held to a specific rate of employment, but rather, that maximising employment becomes one of its objectives. We want to see all parts of our economic apparatus working towards this important goal.
This is in addition to the existing, and critical, goal of managing inflation. We will keep the 1-3 per cent target for inflation outlined in the Policy Targets Agreement.
This approach is not unusual. Central banks in the United States and Australia have dual mandates. Research by the Federal Reserve Board of Boston that compares the inflation outcomes of the US as a dual-mandate country and a range of single-mandate countries shows that over the past 15-20 years the US performed better or as well as single-mandate countries in controlling inflation.
There is no evidence at all that the dual-mandate approach of the US Federal Reserve contributed to the global financial crisis as you suggest. The European Central Bank has a single mandate and its handling of the crisis shows countries with single mandates performed as poorly, if not worse, than the US.
Similarly, your statement that "Labour's proposed changes to the way the bank operates may be more damaging" is devoid of evidence.
In 2003 the Governor formed an informal committee to take on the role of setting the Official Cash rate. Labour's proposal simply seeks to formalise this, and include a minority of outside experts.
Again, this approach is not unusual around the world. It is closest in operation to the United Kingdom model but in Australia and Europe similar models are successfully used.
- Grant Robertson is the MP for Wellington Central and Labour's Finance Spokesman.