The government has supported the Reserve Bank of New Zealand (RBNZ)’s decision to reduce longer-term interest rates to support the economy amid the COVID-19 (coronavirus) pandemic.
The Minister of Finance has issued a letter of indemnity with the RBNZ, allowing it to undertake a programme of large-scale purchases of government bonds on the secondary market up to $30 billion over the next 12 months to reduce interest rates and drive money into the economy.
“This is part of our strategy to mobilise all arms of New Zealand’s economic infrastructure in our fight against the COVID-19 virus,” Finance Minister Grant Robertson commented.
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The government also issued a memorandum of understanding to establish a framework for the decision or other decision that would come up regarding alternative monetary policy. It does not affect core Crown net debt or the government’s operating balance besides reducing finance costs for its borrowing programme.
“We are all uniting together – the government, the Reserve Bank, private businesses, and the retail banks – to cushion the impact on New Zealand from this global pandemic,” Robertson concluded.