Their plan was dangerous, risky, and extremely unpopular. But America — and much of the rest of the world — copied them anyway.
This episode looks at how New Zealand changed the way governments all over the world run their economies. This tiny country created an idea called inflation targeting.
Inflation is like a spice. None is boring. A little goes a long way. And too much can ruin everything. So governments spend a lot of energy trying to keep inflation at just the right level. They want prices to rise every year, but just a little. In the United States, the Federal Reserve uses a two percent target.
This seems totally reasonable and obvious. Find the right level, make it happen. But for the longest time, that’s not how it worked. Inflation was an untamed beast.
About Two Cents’ Worth
Two Cents’ Worth has been launched by Newsroom in a co-production with RNZ. It is the country’s first weekly business podcast and will be broadcast just after the midday news on Sundays on RNZ National, will be available on both RNZ and Newsroom’s websites and can also be found on iTunes and other podcast apps.
Each week we will examine one issue in depth and then convene a panel discussion. Here is this week’s version on RNZ as well.
Two Cents’ Worth – the business week and the business outlook. Previous episodes are below.
Episode 1: Sunday November 4: The rise of double cab utes, the TAB’s big profit and a threat to small electricity retailers.
Episode 2: Sunday November 11: Why your first job is crucial, why interest rates are so low and why wholesale power prices are so high
Episode 3: Sunday November 18: Inside a zombie town as its mill faces a closure decision, how a New Zealand company won big in Singles day and the future of Vector after the departure of chairman Michael Stiassny.
Episode 4: Sunday November 26: The rule of 8s and Trade Me’s big buyer
Episode 5: Sunday December 2: Why we don’t buy cheap petrol
Episode 6: Sunday December 9: Inside open banking
Episode 7: Sunday December 16: A ride sharing revolution
Episode 8: Friday January 25: Salmon set to surpass dairy, save the planet
Episode 9: Friday, February 8: The wedding economy: a love story
Episode 10: Friday, February 15: Our place in the space race