New Zealand probably could not escape the consequences, but there is no need for it to throw its own caution to the winds.

The living standards of any country depend to a large extent on the stability of its politics. New Zealand has been lucky in this respect. While our two main parties disagree on a great many subjects, they have agreed on those that underpin the economy. The central element of the economic consensus has been the monetary control of inflation.

It rests on the Reserve Bank Act 1989, which gave the central bank power to manage interest rates for the sole purpose of avoiding inflation. The consensus has been sustained so long that a generation of New Zealanders has grown up with no memory of inflation, and some of those old enough to remember think it is time the Reserve Bank was given other targets.

Sadly, the Labour Party seems to agree. It declared support for an NZ First bill due in Parliament this week that would have amended the act to require the bank to consider economic measures besides inflation when it sets the base interest rate known as the official cash rate. Debate on the bill was put off by Opposition delays, so the issue is unlikely to go away. Monetary policy is always contentious when the dollar is high, and at the moment it is very high.

High exchange rates lower the earnings of exports when they are converted to New Zealand dollars. Labour wants exports and employment to be added to the Reserve Bank's targets, says economic policy spokesman David Cunliffe. Labour has had this internal debate many times before. This time its doubts about the single inflation target are exacerbated by the fact that central banks in the United States and Europe seem to have thrown all concern for inflation to the four winds.

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In their quest to get their economies growing again after the global financial crisis, the American and European central banks are starting a second or third round of "quantitative easing" - putting more cash into their economies by buying their governments' bonds. Having lowered the cost of money with near-zero interest rates, they had no other way to try to stimulate economic activity other than by increasing the quantity of money in circulation - the classic cause of inflation.

Unless their economies respond and match the additional money with the consumption of more goods and services, the world is facing another era of high inflation. New Zealand probably could not escape the consequences, but there is no need for it to throw its own caution to the winds.

Central banks have been so effective at controlling inflation in all countries where they were given that remit that governments have supposed the banks could be just as effective at stimulating an economy. Experience everywhere over the past four years suggests that is not so. Monetary relaxation is no doubt necessary for a stimulus, but it is not sufficient. Other policies probably need to come into play to restore the confidence of consumers and business to spend and expand.

Political parties need to think about what those policies might be, rather than putting all their faith in a central bank. It would take more than a lower exchange rate to generate the growth, exports and employment that Labour, Greens and NZ First want to add to the Reserve Bank's targets.

The bank takes account of all these things, and many others, every time it sets the official cash rate. But to put all these things in its target would be a recipe for indecision. It would put the country's financial and economic stability at risk again. Labour should come to its senses before another turn at government comes around.