4. Question No. 4—FinanceNICOLA WILLIS (Deputy Leader—National) to the Minister of FinanceQuestion No. 4—Finance4. NICOLA WILLIS (Deputy Leader—National) to the Minister of Finance: Has the Reserve Bank failed its mandate to keep inflation between 1 percent and 3 percent on average over the medium term and by what date does he expect inflation to come back within that range? Hon GRANT ROBERTSON (Minister of Finance): As I said when the member asked a very similar question on 18 October it has been the case since 1989 that it is the Reserve Bank's independent responsibility to manage price stability. The monetary policy committee of the Reserve Bank has stated that in most instances it would aim to return inflation to the target mid-point within a one-to-three - year horizon so therefore it is too early to make a judgment. The monetary policy committee notes that the exact return horizon will vary with each policy position based on a range of economic considerations. In answer to the second part of the member's question making such predictions is extremely difficult in the face of continuing global uncertainty. Bearing this out there is a range of predictions among retail banks here in New Zealand for when annual Consumers Price Index inflation will return below 3 percent. Those range from late 2023 to the 2024-25 fiscal year. The IMF is forecasting inflation to fall to 3 percent in New Zealand within 2023 and this compares to 2024 for Australia the UK the euro area and across advanced economies. Nicola Willis: Why won't he initiate an independent inquiry to establish whether Reserve Bank decisions have worsened the cost of living crisis and inflated bank profits? Hon GRANT ROBERTSON: Well I don't believe there is sufficient evidence to justify such an inquiry and one of the reasons I would say that is New Zealand currently has the 10th-lowest rate of inflation among 38 OECD countries. Nicola Willis: Does he agree with Reserve Bank Governor Adrian Orr that for us to have maintained inflation between the 1 to 3 percent target range we would have had to predict the 2022 Russian invasion of Ukraine back in early 2020" and is it acceptable for the governor to wash his hands of any responsibility for domestic inflation? Hon GRANT ROBERTSON: With respect to the second part of the member's question I think the Reserve Bank as a whole know that their job is—one of their two jobs is price stability. As I noted in my answer to the member's primary question the Reserve Bank's monetary policy committee normally look to a one-to-three - year horizon for the return to the midpoint. Nicola Willis: Has he seen survey data from the Reserve Bank showing fewer than half of respondents had confidence in the Reserve Bank's ability to return inflation to the target range by 2024 and does he share their pessimism? Hon GRANT ROBERTSON: In answer to the second part of that question no. What I share is the view I think that most members would have which is that this has been an extraordinary time for central banks all around the world and—as I noted again in my primary answer—the IMF is forecasting inflation to return to 3 percent in 2023 but it would be 2024 for many other countries. Nicola Willis: Does he think the Reserve Bank's funding for lending programme has contributed to record bank profitability and if not why not? Hon GRANT ROBERTSON: There are many causes of bank profitability. The funding for lending programme if indeed it did have any influence would be a very very small part of that equation. Nicola Willis: When will he respond to the call of every party in Parliament except his own to hold an independent inquiry into the economic response to COVID-19? Hon GRANT ROBERTSON: As has been stated on a number of occasions by the Prime Minister and the Minister for COVID-19 Response there will be a full review of the overall Government's response to COVID and I am confident and I would expect that that would include the monetary policy response. Nicola Willis: When? Hon GRANT ROBERTSON: A single word question. That will be announced when those terms of reference have been completed but I do want to say to the member that since 1989 this House has upheld the independence of the Reserve Bank and I strongly strongly caution the member about some of the statements that she has been making. David Seymour: Is it credible for the Reserve Bank Governor to blame the Ukraine war for inflation being over 3 percent when inflation rose over 3 percent in June 2021—eight months before the war broke out? Hon GRANT ROBERTSON: I don't believe that the member is characterising the view of the Reserve Bank accurately. If the member chooses to look at the recent Monetary Policy Statements and Financial Stability Reports of the Reserve Bank he will see a wide range of issues raised for the reason why inflation is where it is."