The Most Selfish of Self-Interests

Politicians Know Best

One of the great advances in governance in New Zealand has been the Reserve Bank Act (1989).  Prior to that time the Reserve Bank operated as a personal fiefdom of the Prime Minister.  Consequently monetary policy before 1989 was under the influence, if not outright control, of the most powerful politician in the land. 

The Reserve Bank Act made the Governor of the RB, appointed by the government of the day, independent of any political masters.  He (and the Bank) were responsible to the law--to carry out the Reserve Bank Act.  One of the key advances of that Act was to make controlling inflation the number one duty of the Bank when it came to monetary policy settings.  In effect, this created a check and balance upon the venality of politicians.  Virtually every Prime Minister (and Minister of Finance) since the passing of the Act has complained about the settings of monetary policy and has lectured and hectored the incumbent Reserve Bank governor.