It was valid for the Reserve Bank to ask which was the greater risk in 2020: a bit more inflation or an economic collapse. Get it wrong on inflation, and we pay a price in cost of living. Get it wrong in the other direction and the damage would be catastrophic. Economists calling for the Reserve Bank to go back to focusing on a single target, price stability, are really arguing that, in the middle of Covid, the law should have prevented the Reserve Bank from trying to minimise job losses and business collapses.

If the Bank’s critics had their way, the Bank would have looked at the Government’s borrowing for the wage subsidy then increased interest rates in response. Stimulus would be fought with punitive interest rates.

The deliberate policy of price stability through increased unemployment is background to National’s big policy announcement last weekend. National would introduce incentives and sanctions to force more young people to work. I am all in favour of young people in work, but National’s policy conflicts with their support for giving the Reserve Bank the sole target of ‘price stability’ (ie targeting inflation).

No amount of upskilling unemployed young people will make a difference if the Bank targets a minimum level of unemployment to restrain inflation.

Josie's column in Stuff.