at the overall net effects of looser monetary policy on wealth and income inequality have produced mixed results. while the necessary data is limited for new zealand, we intend to push forward on this work in our research agenda. of course, none of these observations are reasons for a government to be unconcerned, or for policy makers to not carefully analyse the data. issues arising from 39 “ the composition of assets varies over the net worth distribution … [ r ] eal estate is a higher proportion of assets of low and middle net worth households. the wealthiest twenty percent of households hold mostly financial assets, although this will include real property that is held in businesses and trusts ” reference : pg. 11, tax working group, information release, distributional analysis, september 2018, https : / / taxworkinggroup. govt. nz / sites / default / files / 2018 - 09 / twg - bg - distributional - analysis. pdf page 16 of 17 wealth and income inequality need to be understood and, if necessary, managed with the appropriate interventions. conclusion today we have traversed a lot of issues. the economic environment, the roles of monetary and fiscal policy, the challenges of building and operating new monetary tools, and the perennial concerns related to excessive financial risk taking, and income and wealth inequality. we have been reminded that with low global inflation and hence low neutral interest rates, our new monetary policy tools will become increasingly mainstream. and that these new tools do not mean we have new targets or policy objectives. price stability and contributing to maximum employment remain the targets for monetary policy. we have also been reminded that fiscal and monetary policy coordination remains critical to economic wellbeing. in new zealand our institutional relationships are strong, providing complementarity of fiscal and monetary actions. this collaboration has been supported – not deterred – by clarity around the reserve bank ’ s purpose and operational independence. work must be done to ensure that the operational aspects of our new monetary tools do not interfere with this clarity. finally, we have highlighted how important it is to have clarity and collaboration on fiscal, monetary and financial policy when considering equity and distributional aspects within an economy. monetary policy decisions appropriately target aggregate measures – inflation and maximum sustainable employment – while being attuned to equity considerations of our policy actions. however, we do not have the tools to manage any desired equity implications of our actions. there are additional decision - makers and tools for such tasks. that said, these are complex and ambiguous issues, and

lost in the noise of short - term interest rate volatility. to be fair to the mci, if anyone feels the need, we should recognise that it was put to a very stiff test with the onset of the asian crisis and the accompanying sharp fall in the exchange rate. any implementation structure was likely to experience a degree of stress through that period. moreover, the concept of the mci as a broad indicator of the overall stance of policy remains valid. what was unsuccessful was its direct application in intra - quarter policy implementation. in any event, the ocr is now in place, and appears to be working well. certainly, short - term interest rate volatility has declined markedly, and that has been welcomed. also welcome has been the much reduced frequency of reserve bank open mouth operations intended to guide monetary conditions in a direction compatible with the longer term policy objectives and the renewed capacity to maintain focus on policy rather than ’ tactics ’. but we need to bear in mind that the ocr structure has so far operated in fairly benign circumstances, and that we certainly haven ’ t escaped the prospect of periodic stresses and awkward decisions. finally, it is worth reminding ourselves that while day - to - day implementation structures have attracted a lot of attention over the past decade, the real action in monetary policy was elsewhere. what matters most in monetary policy are decisions on the policy stance over the course of the business cycle. in our case, the outlook for inflation is re - assessed with each quarterly forecast round and the monetary conditions required to deliver the required outcomes are reset. for the effective conduct of monetary policy over the longer haul, it is the quality of those decisions taken each quarter that is fundamental, not the particular implementation structure employed between those resets. assessing the new zealand experience in one sense, assessing the success or otherwise of new zealand ’ s inflation targeting regime is perfectly straightforward. monetary policy has a single goal and whether that has been met or not is transparently obvious. we need only refer to figure 1 to make a judgement. the message in that figure is a positive one. inflation fell to the target zone promptly, and has stayed within, or close to, the target range since. the exception of the 1995 / 96 period, when inflation was a little above the target range, was minor when taken in broader context. the critics could reasonably respond with a “ so what? much of the world has managed to reduce inflation over that period, most without the need for a regime as strict