Govt orders review into monetary policy during Covid-19 pandemic

The Government has announced an independent review of New Zealand’s monetary policy response during the Covid-19 pandemic.

Finance Minister Nicola Willis says the review aims to identify lessons to strengthen the country’s response to future major economic shocks.

“An independent review means the conclusions found can be objective and constructive,” Willis said.

During the pandemic, the Reserve Bank of New Zealand took unprecedented steps to support the economy, including reducing the Official Cash Rate to 0.25 percent and introducing additional tools such as the Large Scale Asset Purchase (LSAP) programme.

“These actions helped to preserve jobs and keep businesses afloat,” Willis said.

However, she said there were also significant indirect impacts, including decades-high inflation, estimated losses of about $10.3 billion from the LSAP programme, and a surge in asset values, with house prices rising 30 percent in one year.

The review will focus on decisions made by the Monetary Policy Committee and the Reserve Bank’s supporting analysis, including:

• decision-making and communication
• the use of unconventional monetary policy tools
• coordination between monetary and fiscal policy

Two monetary policy experts have been appointed to lead the review.

Athanasios Orphanides is a former Governor of the Central Bank of Cyprus, former member of the European Central Bank’s Governing Council, and a professor at the Massachusetts Institute of Technology.

David Archer is a former Reserve Bank Assistant Governor and former head of the Central Banking Studies Unit at the Bank for International Settlements.

The review is expected to be completed in August 2026 and publicly released in September 2026.