the economy as a whole, and can not sensibly be used to deal with sectoral pressures. in conclusion because i am a central banker, it will not surprise you to know that i believe that central banks can make a very useful contribution to the economy and to society more generally. by running monetary policy to keep the purchasing power of the money they issue stable, they can provide an environment conducive to growth in output and employment. by doing that, they also provide an environment which avoids the capricious redistribution of income and assets which is so often the consequence of inflation. but in some respects, central banks are a little like the judiciary, which most societies have also decided to make independent of day - to - day political influence in the interests of achieving the goals established by those societies in the best possible way. while both the judiciary and central banks can make a very useful contribution to the societies in which they operate, over the longer term central banks can't make economies grow much more rapidly, or materially reduce unemployment, or eliminate the business cycle, or deal with the problems of particular industries or sectors - any more than the members of the judiciary can make us all virtuous.

donald t brash : central banks : what they can and cannot do speech by dr donald t brash, governor of the reserve bank of new zealand, to the trans - tasman business circle, sydney, 30 march 2001. * * * introduction it is a great pleasure for me to be back in australia, addressing an audience hosted by the trans - tasman business circle and australian business economists. last year, i spoke about the history of inflation targeting in new zealand, and noted the extent to which the reserve bank of australia and the reserve bank of new zealand had converged in their respective approaches to monetary policy. this year, it was suggested that i talk about recent developments in the new zealand economy, and the immediate prospects. on reflection, however, i have chosen not to do that. my colleagues and i set out how we see the recent past and immediate future in our march monetary policy statement, published just over two weeks ago, and i usually try to avoid making potentially market - moving comments except when i am announcing a formal review of our official cash rate. the next such review is scheduled for 19 april. instead, i want to talk about what central banks can achieve, and what they can not achieve, and to make some comparisons between the role of central banks and the role of central governments. and my motive in doing this is in large part because i believe that, in recent years, in new zealand as in many other countries, the public have come to believe that central banks can achieve very much more than they can, in reality, deliver. there is a serious risk that, when the realisation dawns that the power of central banks is not in fact unlimited, or when economies which have been performing extremely well in recent years go through a period of slower growth, central banks will receive far more than their fair share of blame. indeed, there are already signs of this blame and anger emerging in the united states : for much of the last decade, alan greenspan was widely assumed to be able to walk on water. now there are angry accusations from many quarters that imply that he should have been able to keep the us economy growing above its trend potential indefinitely, and prices in the us share - market growing with it. perhaps there are similar tendencies closer to home. in all developed countries and most developing countries, the central bank is charged with promoting stable money and a stable financial system. ( this is true even though, in australia and in many other countries, the task