In my last column, I used a puzzling proverb to show that we can’t simultaneously have low inflation and cheap money. Today, I use the equally puzzling comment made by Adrian Orr in the OCR announcement that the government is ‘more of a friend than foe’ to explore the relationship between our government and the Reserve Bank.
The government owns the RBNZ, but since 1989, it has operated as an independent body. As such, the RBNZ answers directly to Parliament, and the RBNZ governor is directly accountable for any failure to achieve the price stability and inflation objectives.
