The trend in central banking
In 1990, the RBNZ Act was adopted, making New Zealand the first country to formally adopt inflation targeting. It has inarguably served the country well, adding stability in a three decade period of prosperity.
It's a mandate that doesn't need changing.
Except change is coming. All institutions crave power and if that means mission creep, then so be it. It's part of a global trend of cowardly government downloading more responsibility to central banks who have few tools to wield and no democratic basis, yet risk becoming easy targets when it all unravels.
In New Zealand, the new mission will include house prices. The central bank accepted a request from the finance minister to add it to its remit today, while at the same time asked that it fall under the umbrella of a larger 'clearing house' that will coordinate the actions of different parts of government.
The RBNZ is also asking that its official Policy Remit be amended to include housing.
It's all a bit ridiculous. New Zealand is one of the world's least-densely populated countries and among the riches. Dare I propose a simple solution to high home prices? Build more houses.
