Low inflation is not pointless

Radio NZ reports:

Legislation to scrap the Reserve Bank’s employment mandate is being rushed through Parliament under urgency, with the opposition decrying it as “pointless” and a backward step.

The bill, being passed under urgency through all stages, is the first piece of legislation for the new government.

It would remove the Reserve Bank’s dual-mandate, meaning it would no longer be required to push for maximum sustainable employment levels across the country.

This would leave it able to focus solely on its other mandate of keeping inflation in the target range of between 1 and 3 percent: avoiding the dangers of deflation where costs go down, while keeping costs from rising too steeply.

Labour had brought the dual mandate in after campaigning on it in 2017, saying a focus on employment would contribute to the overall health of the economy. National and ACT campaigned this year on returning to the single target, saying this would keep it focused on inflation.

The dual mandate means the Reserve Bank has conflicting instructions. A sole mandate of keeping inflation below 3% is not pointless to the millions of New Zealanders who have suffered from runaway inflation for the last two years.