Photo: RNZ / Samuel Rillstone
Finance Minister Nicola Willis directive to the Reserve Bank (RBNZ) is to "show some restraint".
The RBNZ's operating budget for the coming year has been slashed by about 25 percent.
Unlike most other agencies, which receive annual funding through the Budget process, the Reserve Bank's board negotiates five-year funding agreements with the Minister of Finance, who receives advice from the Treasury.
The new agreement allocates the bank operating expenses of $750 million and capital expenditure of $25.6 million for the five-year period. It equates to an average operating expenditure of $150m a year, compared to the current budget of $200 million, Willis said on Wednesday. However, the Reserve Bank was getting about $720 million in the previous five years, plus a top up from the previous government of $78 million, Willis said.
Willis told Morning Report the government would hold the spending flat over the next five years.
"Over the previous five years, that number just kept ratcheting up each year, so you had a culture in which the Reserve Bank was continuing to expand," Willis said.
"New Zealanders are doing it tough... We expect you to show some restraint. Focus on your core statutory requirements."
The reduction in spending, which appears to be driven by increased staffing levels, has been agreed to by both the central bank and the government.
The Reserve Bank was criticised last month after it was revealed the number of full-time equivalent employees had increased from 255 in 2018 to 641 in September 2024.
The bank has one staff member earning between $800,001 and $810,000 a year, four earning between $480,001 and $620,000 a year, four earning $400,001 to $480,000 a year and just over 400 earning between $100,000 and $400,000.
The RBNZ defended the staff increase.
"The current agreement included allowance for necessary catch-up investment in our people and supporting infrastructure capabilities after a long period of relatively low expenditure," it said.
Willis said there is a balance to be struck between expecting restraint, while still allowing the Reserve Bank to continue to fulfil its obligations.
"I don't want them expanding into areas that fall outside their core agreement... We have other government agencies to deliver us a range of other advice," Willis said.
"I want the Reserve Bank sticking to its knitting."
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