In today’s episode, think about which one of these words best describes the relationship between the reserve bank and the government: Co-operative /Co-dependent or Collusive?
The reserve bank (or RBNZ) does a lot of things, but simplistically, they make the money, they control the cost of it, and they play an important role as a regulator in NZ financial system.
Some of the stuff the RBNZ does crosses over with what our government does also – you may be wondering then, why are the two even separate?
Well, given it’s that time of year when some head to church to celebrate the origin of Christmas story – let’s talk about the separation of church and state.
The idea that there should be a wall of separation between church and state was an idea originally based on phrase first coined by Thomas Jefferson – Some believe it’s to protect the state from the church but some think it’s actually the other way around. I’m not going to pretend like I’m a great historian here, but I wonder if some of reasons why Jefferson pushed for this wall was to ensure the proper functioning of each entity without setting lose some unhelpful agendas. There’s another wall that exists between the government and the reserve bank too. Is it a wall that’s designed to protect one side from the other? or is there to protect us, the everyday people?
Well, what do we need protecting from you ask? Helping maintain financial stability in NZ demands decisions get made that aren’t always popular, like keeping interest rates low, which yes, forces house prices higher and creates greater inequality as a side effect.
Politicians like to feed our fear, then solve our problems, because that keeps them in power – central bankers on the other hand simply have a job to do, and they get on with doing it, even when we may not like the side-effects.
Based on current events – as awkward as it appears, the two may be lowering the wall though just enough to communicate and collaborate – is this the point of no return I wonder. Some would suggest we potentially have enough government already, and more involvement in monetary policy would be frightening / Some might say the damage being done in terms of rising inequality, needs to be dealt with.
Either way, the NZ’s central bank could become a central focus in 2021
Jenée Tibshraeny is financial journalist for interest.co.nz and is an acclaimed reporter who covers the interaction between government and economics. I have her on the show today because I have some questions about the Reserve Bank.
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