7 March 2024
Adam Irish
[FYI request #25791 email]
Dear Adam
Thank you for your Official Information Request Act (OIA) request of 19 February 2024 for:
I am writing to request information under the Oficial Information Act regarding the consultation
process that the RBNZ undertakes with the Ministry of Social Development, The Treasury, and
Immigration New Zealand regarding its forecasted unemployment rate.
The trade-of that the RBNZ makes in relation to tightening monetary policy and the pace at which it
pursues its target inflation level of 1 to 3 percent evidently impacts unemployment levels, as represented
by the somewhat semi-strong Phillips curve relationship. I am interested in understanding whether the
RBNZ communicates these forecasts to the government and provides advice on the necessary fiscal
support for beneficiaries and the reduced migration levels required to address rising unemployment.
It appears that external price shocks are influencing commodity prices, and the RBNZ's historically
loose monetary policy (as indicated by the increased growth in the M3 money supply in
2020:(https://tradingeconomics.com/new-zealand/money-supply-m3)) is thanks to past interest rate
decisions is, in part, contributing to growing unemployment. Considering the recent actions taken by
the new government against the unemployed, effectively pushing some victims of the RBNZ's monetary
policy and the government's fiscal decisions, I am curious about the guidance provided by the RBNZ
to the government regarding fiscal policy, its implications for unemployment, and the recommended
fiscal response to balance its monetary policy actions.
Background
Te Pūtea Matua – Reserve Bank of New Zealand (RBNZ) is responsible for monetary policy decisions to
achieve the Government’s target of keeping inflation between 1% and 3% on average over the medium
term. The Monetary Policy Committee (MPC) decides what monetary policy action to take. They do this
by using current conditions and forecasts to inform the Of icial Cash Rate, basing decisions on the best
information and data available at the time.
The MPC Charter provides directions on decision-making procedures, transparency and accountability,
including that the MPC should seek to understand material interactions between fiscal and monetary
policy and support information-sharing between the RBNZ and the Treasury- Te Tai Ōhanga.
The RBNZ regularly shares its views on the economy with the Treasury, including discussing forecasts
for unemployment. There is also an observer from the Treasury participating in the monetary policy
process, which supports information sharing between the RBNZ and the Treasury. The RBNZ also briefs
the Minister of Finance on the forecast outlook for the economy.
As we stated in the February Monetary Policy Statement, the unemployment rate, currently 4.0%, is
lower than earlier projected after rising only slightly in the December 2023 quarter. The labour market
is assumed to continue to ease over the medium term, with fewer job vacancies and rising
unemployment, projected to reach about 5% at the end of 2024.
Meanwhile, net immigration remains strong, supporting overal demand in the economy. Although
migration data are subject to considerable revision until 16 months after the initial estimate, the most
recent data indicate that the surge in migration may have peaked. Migration is assumed to return to its
2014- 2019 average rate over the medium term.
Response
Beyond this level of information-sharing described above, the RBNZ’s remit does not extend to
providing fiscal advice. As such, the information you have requested does not exist and is refused under
section 18(e) of the OIA.
The Treasury is the Government’s lead economic and financial adviser and steward of the public sector
financial management, including advice on fiscal strategy.
You have the right to seek an investigation and review by the Ombudsman of this OIA response.
Information about how to make a complaint is available at www.ombudsman.parliament.nz or
freephone 0800 802 602.
We intend to publish this response on the Reserve Bank’s website at:
www.rbnz.govt.nz/research-and-
publications/of icial-information-requests. We do this in order to improve transparency and provide an
additional resource for anyone seeking information.
Yours sincerely
Government and Industry Relations Team
Reserve Bank of New Zealand – Te Pūtea Matua
