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OCR decisions should be made by board not governor, NZMEA says

Friday 20th July 2012

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The Reserve Bank of New Zealand's monetary policy decisions should be made by its board rather than the governor alone given the calibre of directors, says New Zealand's Manufactures and Exporters Association.

The central bank this week named Rod Carr, vice chancellor of the University of Canterbury, to its board.

"The Governor system means that one person is left to make a decision which impacts a diverse group of sectors," John Walley, chief executive of the NZMEA said in a statement. "It would make sense to have a board that could include members from a range of backgrounds, like Rod Carr, to ensure better informed decisions."

"A person that has the skills to lead an organisation to supervise financial institutions may not be as good at determining the economy wide impacts that monetary policy has," Walley said.

All nine members of Australia's Reserve Bank collectively review the target cash rate when it meets nine times a year and Governor Glenn Stevens serves as its chair, while the RBNZs board only reviews the performance of the governor and the bank.

"There are a number changes occurring in monetary policy at the moment with many countries adopting a more export-sensitive approach," Walley said. "It is important that we have the right structure in place to make those decisions."

Carr's appointment comes before the RBNZ meets to review its official cash rate this month. Economists are betting that Governor Alan Bollard will leave the OCR at 2.5 percent, according to a Reuters poll.

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