The objective was to ensure that wage growth was in line with a set of targets for inflation of 8, 6, and 4 per cent over a 3-year period. This was done with the assumption that monetary and fiscal policy would be set to be consistent with such a result.5 The imposition of wage and price controls was very controversial, to say the least.
It is still 2.5 per cent, and financial markets have recently been toying with the idea that the OCR might yet need to go lower (albeit mainly because of global risks). Even our counterparts across the Tasman, dealing with Australia’s record terms of trade, have been cutting their policy rate back towards 2009 lows.