New Zealand's next Reserve Bank Governor should consider changing the inflation target to 2.5%, to better align with what it has historically been able to achieve, Westpac's chief economist says.
The search for a replacement for Adrian Orr is understood to be well advanced.
Westpac chief economist Kelly Eckhold said there were a number of reforms the person who was appointed could consider.
That could include the introduction of publicised formal votes at each meeting, including details of the person who made each vote. At the moment, votes were only held when a consensus was not reached, which has occurred three times.
"On an ongoing basis, most of the time we don't get votes. We certainly have no clear idea about who on the committee is advocating what types of positions," Eckhold said.
"That does make it quite hard to work out what is the balance of views around the committee and what sorts of issues are likely to be most important in determining changes and starts. And I think if we had more information on that, it would be easier to predict what they were going to do. And I think being a bit more predictable is desirable."
The bank could publish more material about the monetary policy committee's members' views on the balance of risks around the Reserve Bank forecasts, he said.
All meetings could be followed by a press conference, rather than some only resulting in a statement as at present. He said a meeting in January could be reintroduced with a shift in the timing of the remaining meetings.
He said it would make sense to avoid the current long gap between the November meeting and February. "In between time, we get lots of data, we get GDP (Gross Domestic Product), we get the HYEFU (Half Year Economic and Fiscal Update). You know, sometimes nothing happens and it's fine, and other times there's a lot going on."
He said his most contentious suggestion was likely to be that the Reserve Bank adjust its inflation target, from a mid-range point of 2% to 2.5%.
"For quite a long period of time now, sort of we're talking about 25 years, inflation has averaged at about 2.6%. So what that tells you is that we've had a target at 2% for a very long time, going over quite a few cycles now, but we're really not able to consistently hit 2%.
"And what tends to happen is that sometimes inflation is a little bit below… but when it goes above, it spends a lot more time above and by further above. But it just tells you it's been quite hard to kind of consistently achieve that."
He said it would also bring New Zealand in line with Australia.
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"Whilst I don't think increasing the inflation target will matter that much for how much we grow or how high the unemployment rate is, equally, it's not going to cost us much either because, ideally, you wouldn't get any more inflation out of this."
Eckhold said it was likely that a new governor would be open to change.
"My sense is that the bank has been increasingly open to having a different approach to transparency. Certainly the change in the meeting dates seems to be something that's under active consideration.
"But you can understand how, until they get a new governor installed, and most of these changes will require the Minister of Finance to be comfortable with changing, either the remit or the charter… it's not really possible to do a lot of these things right now.
"But I would hope that they would be open to many, if not all, of these suggestions."
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