KEY POINTS:
It may all still prove a waste of time. But the potential usefulness of Parliament's monetary policy inquiry has been boosted by the decision to include the impact of the Government's spending and tax policies in its terms of reference.
Examining "the interaction of monetary policy with other
elements of economic policy, including fiscal policy" features among the very wide-ranging terms of reference the finance and expenditure select committee released yesterday.
It is there despite some internal wrangling among Labour's ranks.
It reflects the conclusion by the committee's chairman, Shane Jones, that the inquiry would lack credibility without it. His business background and connections show in this.
The inquiry reflects widespread concern that in the past few years successive interest rate rises have done little to rein in the housing market but have hammered the export sector through their effect on the exchange rate.
Its broad terms of reference reflect the various interests of the parties represented on the committee.
New Zealand First was keen for the committee to consider the economy's potential growth rate - its capacity for non-inflationary growth - and how it can be improved.
The Reserve Bank's view on that is fundamental to the interest rate calls it makes.
A related issue, included at National's behest, is productivity, how it can be improved and the constraints upon it. National is sceptical about the usefulness of the inquiry but has said it will not obstruct it.
The Greens want to hear about the tax treatment of investment properties. That will be covered by the committee's decision to review the options considered by Treasury and Reserve Bank officials last year in a report on "supplementary stabilisation instruments".
And in case all that was not broad enough, the committee will consider the causes of inflation, the effectiveness of monetary policy in controlling it and any other measures which could enhance monetary policy.
Submissions close on July 19.
Conspicuously absent from the terms of reference is any explicit mention of the housing market.
Some members of the committee including Jones and National's finance spokesman Bill English are sceptical about housing's scapegoat role in explaining the difficulty monetary policy has had in gaining traction in recent years.
Governor Alan Bollard has made it clear that while the housing market is still his No 1 concern, the increasingly stimulatory stance of fiscal policy is No 2.
Economists have noted that the Treasury now reckons the fiscal impulse will be stronger in the next June year than in the current one - 1.6 per cent of GDP against 0.7 per cent.
When Bollard first raised such concerns in his December monetary policy statement six months ago the committee's MPs studiously ignored it when he apeared before them that day. The impression was that they didn't want to hear the answer so they didn't ask the question.
That was not a good look for the committee. This is a better one.
