These developments have led to a great deal of puzzlement and some anger. This morning I want to answer those charges. As long as we want to retain our own money, we need to have a monetary policy, and some institutional structure with which to implement that monetary policy. The key issue is what that institution, typically a central bank, should try to achieve with its powers. I don't think even our worst critics have accused us of manipulating monetary policy for political purposes, which of course was one of the accusations levelled against Rob Muldoon.
Monetary policy remains focused exclusively on that objective.
Indeed, any other focus for monetary policy would be inconsistent with the legislation under which the Reserve Bank operates, passed without dissent in 1989. But it is important to recall that price stability was not chosen as the single objective of monetary policy because Parliament thought that other objectives were unimportant. And indeed, this point is now recognised quite explicitly in the wording of the Policy Targets Agreement between the Treasurer and myself. Monetary policy aimed at stable prices assists social justice by avoiding the kind of capricious transfers of income and wealth which are the inevitable result of inflation. Monetary policy aimed at stable prices assists growth in output and jobs by helping the price system, which is at the heart of the market economy, work more effectively.