When a RBNZ “funding cut” is actually an increase

Finance Minister Nicola Willis touted an RBNZ funding increase as a 25% funding cut. Source: Facebook.

If I was running the Reserve Bank and therefore in charge of keeping inflation under control, and the minister of finance had just agreed to increase my allocated funding for the year ending June 30, 2026 by 3.7% and my forecast for inflation for that year was 2.2%, I’d consider that a funding increase.

Because that’s exactly what is happening under the latest five-year funding agreement between the Reserve Bank and finance minister Nicola Willis.

And the context is well-known to any New Zealander paying attention; RBNZ failed for three successive years to keep inflation within its 1% to 3% target range, allowing it to shoot as high as 7.3% in the year ended June 2022.

Much of the blame for that runaway inflation can be directly sheeted home to RBNZ’s own money printing programme.