Monetary policy has quietly become an election issue. New Zealand First leader Winston Peters said last week that his party wants maximum sustainable employment put back into the Reserve Bank’s mandate, and that he would push for it the next time he sits down to negotiate a coalition. The comments, reported by interest.co.nz on 29 July, drew same-day responses from the Prime Minister, the Finance Minister and the ACT leader, which is a fair sign that everyone involved thinks the argument matters.
“Successful countries have massively full employment,” Peters said. “That’s what this election is all about.” Asked whether he would raise it in coalition talks, he said, “I certainly would next time around.” His objection to the current arrangement was blunt. “All the Reserve Bank Governor has to do … is to keep [inflation] under a certain percentage. Otherwise she loses her job. Doesn’t matter if 100,000 people lose their job, she won’t lose hers. That’s not a smart economic management model, in my view.”
The history here is worth setting out, because it makes the politics stranger than it first looks. The employment objective was added in 2018 by then Finance Minister Grant Robertson, in a Labour government that New Zealand First was part of. It was removed by the current coalition in December 2023, in legislation passed under urgency as the very first bill of the parliamentary term. New Zealand First voted for the repeal. Peters is now campaigning to undo something his own party helped enact two and a half years ago, and he has not pretended otherwise. “Regrettably, we had two parties of Government that didn’t want it,” he said, before adding that it was “one of those dead rats you’ve got to swallow”.
Christopher Luxon read the move as a signal aimed across the House, describing it as “like a soft outreach to Labour”. He defended the single mandate on its merits. “Because if you don’t keep inflation within the band, you get [higher] interest rates, you get a slowdown in the economy and people lose their jobs. So the best way to tackle unemployment is to be really ruthless on keeping inflation [in that 1% to 3% band],” he said.
Finance Minister Nicola Willis made the international comparison argument. “If you look across the world, having Reserve Banks’ singularly focused on a mandate of keeping inflation low and stable has been shown to be the most positive thing for economies,” she said. ACT leader David Seymour went harder, saying “it would be economic madness to forget about inflation just as soon as we’ve wrestled the inflation genie back into the bottle”, and pointing to the price rises that followed the last time the dual mandate was in force.
Labour has been circling the same policy for months. Finance spokesperson Barbara Edmonds has said the party is seriously considering restoring the dual mandate, and she has grown visibly tired of the framing her opponents use. “Every time I raise the fact that there was a dual mandate like other countries that we compare ourselves to such as Australia and the US, I’m then accused of saying that I want high inflation,” she said. “However, you can flip that back on those other parties and say, ‘well do you want more people unemployed?’” She also noted that while a minister would normally consult the Reserve Bank on such a change, “ultimately the decision does lie with the minister”.
The Greens are not convinced the argument is worth having. Co-leader Chlöe Swarbrick said the evidence she has seen suggests the switch made little practical difference either way. “The Reserve Bank has always had an eye on employment, but let’s go back to the bigger picture, which is the reality that monetary policy is a blunt instrument,” she said. Her view is that employment is properly a job for fiscal policy, because government “gets to decide how that is distributed, what kinds of industries we’re backing, and whether that money is flowing offshore or not”.
What makes the timing sharp is the state of the two numbers the argument is about. Annual inflation reached 4.1 percent in the June quarter, well outside the Reserve Bank’s 1 to 3 percent band, with petrol up 27.5 percent over the year accounting for almost a quarter of the increase. The Reserve Bank responded by lifting the Official Cash Rate to 2.50 percent on 8 July, its first increase since 2023. Unemployment, meanwhile, sat at 5.3 percent in the March quarter and Stats NZ publishes the June quarter figures on Wednesday, with most bank economists picking a decade high. A central bank tightening into a softening labour market is exactly the scenario that makes the mandate question feel less academic than usual.
The Reserve Bank itself would rather the remit stopped moving. Chief economist Paul Conway, speaking at a BusinessNZ event in mid-July, questioned the churn. “Is it really necessary to change it every time there’s a change of Minister of Finance?” he asked. He said the Monetary Policy Committee already weighs employment and exchange rate volatility as secondary considerations, and that a different remit “would mean a different path for interest rates”, though he would not say by how much.
None of this is settled, and it may not be settled on 7 November either. The dual mandate has now been added once and taken away once inside eight years, both times by a government that had the numbers to do it quickly. If Peters gets his way in the next round of negotiations, it goes back. If National and ACT hold the line, it stays out. Voters who want to know where each party sits before they mark a ballot can compare positions using our voting tool.
Should the Reserve Bank have to think about jobs as well as prices, or is one target the cleaner arrangement? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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