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RBNZ five-year Funding Agreement ratified

RBNZ five-year Funding Agreement ratified

(9 June 2015 – New Zealand) A new five-year funding agreement for the Reserve Bank of New Zealand (RBNZ) was ratified by the New Zealand Parliament on 5 June.

“The Funding Agreement ensures that the Bank has sufficient resources to meet its expanded role and obligations while maintaining tight control of costs,” RBNZ governor Graeme Wheeler said.

The Funding Agreement is an important instrument for maintaining the central bank’s operational independence in that it provides multi-year funding and specifies how much of the Bank’s income may be used to fund the Bank’s operating expenses.

The new Funding Agreement is valid from 1 July 2015 to 30 June 2020.

The new agreement sees the RBNZ’s core operating expenditure increase marginally from NZ$49.0 million (A$45.2 million) in 2014-15 to NZ$49.6 million in 2015-16, and then increase to NZ$52.1 million by the final year, 2019-20.

Funding for the direct costs of issuing banknotes and coins is separate within the agreement, and amounts to NZ$14.4 million in 2015-16 and NZ$20.2 million in 2016-17 before reducing to NZ$11.1 million in 2019-20.

“The increase in core operating expenditure over the five years is modest, averaging 1.3 percent per year,” said Wheeler.

The RBNZ has a number of important projects underway, including those related to issuance of new banknotes, development of the Bank’s treasury systems, and an upgrade of its payment and settlement systems.

Wheeler said the new Funding Agreement has been made in an environment of fiscal constraint.

Productivity improvements, which include some reductions in staffing levels that began in February 2015, will restrain the growth in costs.

“The Reserve Bank’s responsibilities have expanded considerably since 2008, including prudential supervision of insurers and anti-money laundering supervision, and it has developed its macro-prudential policy capabilities and toolkit.”

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