A public inquiry should examine the extent to which a tidal wave of cash poured on the New Zealand economy caused the current cost of living crisis, says Opposition Leader Christopher Luxon.

“The Reserve Bank and the Government took unprecedented steps in 2020 and 2021 to pump money into the financial system. The massive and ongoing monetary and fiscal response unleashed a tidal wave of cash into New Zealand’s economy.

“The Government should initiate an independent public inquiry into the Reserve Bank’s monetary policy response from March 2020 until late 2021, to better understand the lasting impact of key decisions, the length of stimulus and any lessons that can be learned for the future.

“It’s not credible for the Reserve Bank, nor the Government’s own agencies, to lead a review.

“National respects the independence of the Reserve Bank and seeks to uphold that independence. That must not stop us evaluating the performance of the Bank on behalf of the New Zealanders we serve.

“A report out today, co-authored by former Reserve Bank Governor Graeme Wheeler, questions the recent approach taken by central banks across the world, particularly the decision to extend highly stimulatory monetary policy long after the initial response.

“New Zealanders deserve an independent appraisal of the decision-making during this extraordinary time. Households struggling through a cost of living crisis need assurance that economic decision makers are doing everything possible to prevent a repeat. Quite simply, could the worst of today’s inflation hangover have been avoided and if so, how can we stop it happening again?

“The terms of reference for this inquiry should be drafted in consultation with parties across Parliament. A key question will be the roles the Finance Minister and the Treasury took in both facilitating the Reserve Bank response and co-ordinating with it.

“The inquiry should be time-bound, to ensure public scrutiny of its outcomes prior to the appointment process for the Reserve Bank Governor, which is required ahead of the end of Adrian Orr’s current term in March next year.

“It’s important that New Zealanders have confidence in the country’s economic and fiscal settings and that lessons are taken from recent extraordinary actions.”

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