Headline: RBNZ’s Gai urges policy rethink as global risks reshape the economic outlook
Key Takeaways
The Reserve Bank of New Zealand’s Prasanna Gai says policymakers face a rapidly changing world economy, where geopolitical tensions, climate-related shocks, and persistent supply chain disruptions are altering the rules of trade and complicating the outlook. Speaking in Auckland, the Monetary Policy Committee member argued that central banks and governments must update their playbooks to provide clarity and confidence in an environment defined by uncertainty.
Gai described a shift to a new era of international commerce, with the “rulebook” effectively being rewritten. That transition, he noted, heightens uncertainty for households and businesses and raises the bar for effective monetary policy. In his view, central banks should be more innovative in the way they design policy frameworks—prioritizing clear, consistent, and conditional guidance that anchors expectations and helps shape decision-making across the economy, rather than reacting only to short-term noise.
He emphasized that central banks must “set the tone” for the economic conversation by providing a stable narrative that influences how millions of individual choices are made. At the same time, Gai said fiscal policy carries a greater share of responsibility in this environment. He called for budget strategies that are coherent, transparent, and long-term in focus to support monetary policy and the broader path for the New Zealand economy.
Key Points: – RBNZ MPC member Prasanna Gai warns global forces are rewriting trade dynamics and clouding the outlook. – Geopolitical risks, climate impacts, and supply chain strains are heightening uncertainty for households and businesses. – Central banks should adopt more innovative policy frameworks and offer clear, conditional guidance to anchor expectations. – Monetary authorities must shape the economic narrative rather than react solely to short-term developments. – Fiscal policy needs greater clarity, coherence, and long-term strategy to support overall economic stability.
