Finance Minister Grant Robertson says the Treasury used “over-zealous language” when it wrote he would disqualify monetary policy researchers from joining the Reserve Bank’s monetary policy committee (MPC).
The Treasury, in a 2019 report on MPC appointments, told Robertson: “As you previously agreed with the [Reserve Bank] Board, a strict approach has been taken regarding conflicts of interest.
“This has included excluding from consideration any individuals who are engaged in, or likely to engage in future, in active research on monetary policy or macroeconomics.”
The statement baffled many in the economics community, including former Reserve Bank Governor Don Brash, who dubbed it “utterly extraordinary”.
Critics questioned why Robertson would prevent specialists from joining the powerful seven-member committee, tasked with keeping inflation in check using tools like the official cash rate (OCR).
Nonetheless, as the process to replace two members - whose terms are due to expire - gets under way, Robertson, the Reserve Bank board chairman Neil Quigley, and the Treasury say excluding researchers was never their policy.
The Treasury explained its 2019 comments were the result of a “misunderstanding post interviews around how a candidate might struggle to balance confidentiality of sensitive information with their academic freedom”.
It clarified “active monetary policy and macroeconomics researchers” were - and will continue to be - eligible for MPC membership.
Robertson noted the MPC’s three existing external members had done research.
For example, Bob Buckle is a monetary policy and macroeconomics expert and Victoria University professor, who has been publishing research while sitting on the MPC.
The Reserve Bank, in a press release issued earlier in the week, specifically said researchers would be eligible and applicants would be assessed against various criteria, including “expertise in monetary policy and macroeconomics”.
“Applicants will require a strong understanding of conflicts of interest, the sensitivity associated with ‘inside knowledge’ of monetary policy decisions, and the constraints on other activities that are necessarily associated with membership of the MPC,” the Reserve Bank added.
The terms of external MPC members Peter Harris and Caroline Saunders are due to expire on March 31 and June 30 respectively.
Harris is an economic consultant and former Council of Trade Unions economist. Saunders is an agricultural economist, a professor specialising in trade at Lincoln University, a director of Manaaki Whenua - Landcare Research, and a Biosecurity Ministerial Advisory Committee member.
The Reserve Bank board will consider applications from those keen to fill the part-time roles on the MPC, ahead of recommending (after the October election) who the Finance Minister should appoint.
It expects appointments to be announced in early 2024.
The MPC’s internal committee members include Reserve Bank governor Adrian Orr, deputy governor Christian Hawkesby, chief economist Paul Conway and general manager of economics, financial markets and banking Karen Silk.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.