Real GDP declined by 1.6 percent in 1991 and the unemployment rate increased from just over 7 percent in 1990 to 11 percent at the start of 1992. Nevertheless, New Zealand’s macroeconomic record before and after the Reserve Bank Act came into effect indicates that its price stability objective has been met without any diminution in our economy’s long term growth rate.
In the 20 years before the Act, annual real GDP growth averaged 2.2 percent while annual inflation was volatile around an average of 11.4 percent. Since 1990, annual inflation and real GDP growth have averaged 2.3 and 2.6 percent respectively and there has been a marked decline in inflation variability.