Before 1989, the Bank tried to help keep unemployment low, promote economic growth, and keep inflation low. However, the government came to realise that the Bank could not do all these things. They also recognised that the high inflation of the 1970s and 1980s had hurt New Zealanders. It was decided that the best thing the Reserve Bank could do was keep inflation low. The Reserve Bank keeps inflation low because Parliament has decided that keeping inflation low contributes to helping the New Zealand economy to grow and helps to provide employment and development opportunities.
Inflation is difficult for people on fixed incomes.
If prices are rising but your income is fixed, as time passes you will be able to buy less and less. The purchasing power of your money has been eroded. This problem can be addressed if incomes are indexed or rise with inflation. High inflation tends to be more variable and hence unpredictable. This makes it difficult for business people to plan.