Reserve Bank of New Zealand
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| Headquarters | Wellington, New Zealand | ||
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| Coordinates | 41°16′44″S 174°46′30″E / 41.278814°S 174.77503°ECoordinates: 41°16′44″S 174°46′30″E / 41.278814°S 174.77503°E | ||
| Established | 1934 | ||
| Governor | Graeme Wheeler | ||
| Central bank of | New Zealand | ||
| Currency |
New Zealand dollar NZD (ISO 4217) |
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| Reserve requirements | None | ||
| Interest rate target | 2,00% (OCR) | ||
| Interest on reserves | 3% | ||
| Website | www.rbnz.govt.nz | ||
The Reserve Bank of New Zealand (RBNZ) is the central bank of New Zealand. It was established in 1934 and is constituted under the Reserve Bank of New Zealand Act 1989. The Governor of the Reserve Bank is responsible for New Zealand's currency and operating monetary policy. The Bank's current Governor is Graeme Wheeler. Employees of the bank operate under the framework of a managerial hierarchy.
The Reserve Bank of New Zealand does not offer financial services to the public nor does it offer deposit insurance, and its website refers people to other financial institutions.
Unlike the United States Federal Reserve, the Reserve Bank does not have elements of private ownership; according to its website, "The Reserve Bank does not have shareholders. It is 100% 'owned' by the New Zealand Government, with any extra revenue that the Reserve Bank makes going back into the Crown accounts. The Central Bank is not a government department, but is a body corporate whose finances are included in the Crown accounts."
The Reserve Bank's primary function, as defined by the Reserve Bank of New Zealand Act 1989 is to provide "stability in the general level of prices."
The Reserve Bank is responsible for independent management of monetary policy to maintain price stability. The degree of price stability is determined through a Policy Target Agreement with the Minister of Finance. Policy Target Agreements are public documents and hence a government cannot secretly change the targets to gain a short term surge in economic growth.
The mechanism of this is the Official Cash Rate (a percentage) which affects short-term interest rates. The Bank will provide cash overnight at 0.50% above the cash rate to Banks against good security with no limit. Furthermore, the bank will accept deposits from financial institutions with interest usually at the official cash rate.
Banks that offer loans at interest higher than the official cash rate will be undercut by Banks that offer cheaper loans, and banks that loan out lower than the official cash rate will make less compared to other banks which can simply deposit their money in the Reserve Bank with a higher rate of return. The Reserve Bank borrows and offers loans with no limit on volumes in order to ensure that the interest rate in the market remains at the Official Cash rate level.
Through controlling this, the Reserve Bank can then influence short term demand in the New Zealand Economy and use this to control prices.
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Wikipedia