The upcoming PTA
With Graeme Wheeler set to take over as RBNZ govenor on the 26th of this month, it is clear that a new PTA will be signed. Westpac did an excellent piece discussing this. I’d suggest reading it.
Some key points I took out (and agreed with, so was easy for me to pick them up 🙂 ):
- If anything changes it is likely to be along the lines of “credit growth” – increasing discussion of credit growth by the Bank, as well as outside it, makes this plausible.
- Large scale adjustments to the PTA, or functioning of the Bank, from what they are currently looking at are unlikely.
- The Act doesn’t set the tools – just the mandate. Related point – the Bank has been researching macoprudential tools for a long time now, and will understand how to use them in context.
- Using multiple tools in a “cyclical” manner will make policy more difficult to understand and more complex.
For me, the last point is pretty essential and there is a lot of debate around it. I’m still not a fan of the concept of discretionary countercylical macroprudential tools – when we start going down that round we are assuming we have a lot more knowledge about the macroeconomy than I believe we actually do as economists. However, we will see – and research will keep being done that will help to improve policy and the communication of policy (which is an incredibly important thing) over time.
If only we had the same transparency with fiscal policy.