(Bloomberg) — Governments need to tighten spending plans to help their central banks combat inflation, according to New Zealand Finance Minister Grant Robertson.
“We must bring inflation under control,” he told Bloomberg Television Friday in Wellington. “Fiscal policy’s been very expansionary through Covid as it needed to be, but finance ministers like myself now have to think about how do we stabilize that? How do fiscal and monetary policy be friends together?”
New Zealand’s central bank was among the first to start tightening as inflation pressures began to mount in late 2021, while others such as the Federal Reserve have signaled they have significant interest rate increases still to come. Robertson met Fed Chairman Jerome Powell this week during a US visit, where he is also attending International Monetary Fund meetings in Washington.
The Fed’s tightening has pushed the dollar higher, weighing on other nations’ currencies such as the kiwi dollar, which has dropped 8% the past three months.
“Each country has to deal with its own situation,” he said. “While the United States is massively influential on what happens in other countries, they have to manage the goals that they have for monetary and fiscal policy.”
Robertson remains optimistic that New Zealand can avoid recession, but said policymakers will need to be mindful of global developments.
“We come into the difficult situation the world has with good strong fundamentals, low unemployment, low public debt and so on,” he said. “Over the next couple of quarters, New Zealand will go fairly well, but we have to keep a close eye on the global economy.”
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