The Capitalism and Freedom in the Twenty-First Century Podcast The Origins of Inflation Targeting in New Zealand with Don Brash | Hoover Institution
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Dec 4, 2025 In a captivating discussion, Don Brash, former Governor of the Reserve Bank of New Zealand and leader of the National Party, shares his journey through central banking and politics. He details the origins of New Zealand's pioneering inflation-targeting framework born from the 1980s' high inflation crisis. Brash explains the importance of public communication in managing inflation expectations and defends the necessity of central bank independence. He also reflects on the legacy of 1980s market reforms and the ongoing need for further liberalization and privatization.
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Professional Path To Central Banking
- Don Brash recounted shifting from history to economics and discovering pro-market benefits of foreign investment during his PhD and World Bank work.
- He described running an investment bank, leading the Kiwifruit Authority, and being asked unexpectedly to become Reserve Bank governor.
Government Chooses Target, Bank Delivers
- New Zealand law made the elected government choose the inflation rate while technocrats in the Reserve Bank had to deliver it.
- That split assigns political responsibility to ministers and operational delivery to the central bank, anchoring accountability and expectations.
Target Started As A Flippant TV Remark
- The zero-to-two percent target originated from a flippant TV remark by Finance Minister Roger Douglas after inflation fell below 10%.
- Brash adopted that informal target when he became governor and it later became the formal written target by law.
