NZ Admits Mistakes Made in COVID-19 Monetary Policy Response
New Zealand's Finance Minister Nicola Willis has acknowledged that mistakes were made in the country's monetary policy response to COVID-19. An independent review of the Reserve Bank's actions during this time found that stimulus remained in place for too long, contributing to a costly boom-bust cycle.
The review, conducted by Professor Athanasios Orphanides and former Reserve Bank Assistant Governor David Archer, was established to identify lessons for future economic shocks. It concluded that the initial response from the Reserve Bank's Monetary Policy Committee (MPC) was appropriate, but monetary policy stimulus remained in place too long.
This led to inflation reaching 7.3% and an unemployment rate falling to what the reviewers called an 'unsustainable historic low'. To get inflation back under control, a substantial tightening of monetary policy was required, which increased unemployment and curtailed growth.