NZ Reserve Bank’s Pandemic Policy Under Review by Finance Minister Willis

New Zealand’s monetary policy response to the Covid-19 pandemic is under scrutiny as Finance Minister Nicola Willis has ordered an independent review of the Reserve Bank’s actions. The review, announced on February 11, 2026, aims to extract lessons for future economic crises.

During the pandemic, the Reserve Bank of New Zealand (RBNZ) implemented aggressive monetary easing, slashing the Official Cash Rate (OCR) to a record low of 0.25%. This move, designed to stimulate the economy and mitigate the impact of lockdowns, directly influenced mortgage rates and broader borrowing costs for businesses and consumers. Alongside the OCR cut, the RBNZ embarked on a large-scale asset purchase programme (LSAP), a form of quantitative easing involving the purchase of government bonds to inject liquidity into the financial system.

While Willis acknowledged that these actions were instrumental in preserving jobs and keeping businesses afloat during a period of unprecedented economic disruption, she also highlighted the significant consequences that followed. Specifically, she pointed to decades-high inflation and a loss of approximately $10.3 billion on the LSAP programme. The period saw a substantial surge in asset values, with house prices increasing by 30% in a single year.

“The purpose of the review is to learn from experience,” Willis stated. “An independent review means the conclusions found can be objective and constructive.” The review is expected to be completed in August 2026, with the findings released the following month, a timeline that places the publication just six weeks before a general election, prompting questions from the Labour party regarding the political motivations behind the timing.

The scope of the review will encompass decisions made by the Monetary Policy Committee (MPC), the body responsible for setting the OCR, as well as the analysis provided by the RBNZ to support those decisions. This includes an examination of the MPC’s decision-making processes, its communication strategies, the implementation of unconventional monetary policy tools like LSAP, and the coordination between monetary and fiscal policy.

Who Will Lead the Review?

The independent review will be conducted by Athanasios Orphanides and David Archer, both highly respected figures in the field of monetary policy. Orphanides, a former governor of the Central Bank of Cyprus and a member of the Governing Council of the European Central Bank, currently serves as a professor of the Practice of Global Economics and Management at the Massachusetts Institute of Technology. Archer brings extensive experience from within the RBNZ, having previously served as an assistant governor, and also held a position as the head of the Central Banking Studies Unit at the Bank for International Settlements.

The RBNZ’s aggressive easing stance was later reversed as inflation began to accelerate globally in 2021. The central bank began a rapid tightening cycle, raising the OCR significantly from its historic low. This shift in policy aimed to curb inflation but also increased borrowing costs for households and businesses.

This review is not the first time Willis has publicly questioned the RBNZ’s actions. While in opposition, she called for an independent review of the central bank following the reappointment of former governor Adrian Orr by the previous Labour government in November 2022. This latest initiative signals a continued commitment to scrutinizing the RBNZ’s performance and ensuring accountability in monetary policy decision-making.

The findings of this review are likely to have significant implications for the future conduct of monetary policy in New Zealand, particularly in the context of managing economic shocks and balancing the competing objectives of price stability and full employment. The independent assessment will provide valuable insights into the effectiveness of the RBNZ’s pandemic-era policies and inform future responses to unforeseen economic challenges.