Finance Minister Michael Cullen has indicated Labour, if elected at next month's election, will negotiate a different approach to monetary policy.
Dr Cullen said that it was clear the Reserve Bank aimed for a 1.5 per cent inflation rate while the Government's understanding of the target aimed to keep inflation withinthe band of 0 to 3 per cent.
Dr Cullen told journalists the two different interpretations of the Reserve Bank's targets led to hiking inflation rates in a way which reduced the country's sustainable rate of economic growth.
Speaking at a briefing at the opening of the Government's books today, Dr Cullen said monetary policy was now a matter for legitimate political debate in the run up to the election.
Dr Cullen didn't blame the bank or former governor Don Brash -- now standing for National -- for running monetary policy too tightly and squeezing out economic growth.
However, he did say the renegotiation of monetary policy targets would ensure the incoming governor would interpret the inflation band target in the same way as the government.
Dr Cullen refused to say which actions of the Reserve Bank had been incorrect due to the different interpretations or whether he believed it raised interest rates too quickly, but hoped for change in the future.
"I would prefer the Government to target 0 to 3 (per cent). It is not about their safety (the bank's), it is about the management of New Zealand's economy".
"I don't think that anybody doubts that monetary policy is going to be tightened in 2002. It is a question of how far and how fast against the policy target.
"All I am saying is the bank clearly interprets the PTA (the agreed targets) in a different way from the Government and therefore legitimately we have a right to see renegotiation of that in the context of the incoming governor...
"Obviously we will discuss with the governor whoever he or she may be what their interpretation of the PTA is," Dr Cullen said.
