The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’

Those Kiwi revolutionaries are at it again. In 1989, New Zealand’s central bank was the first to commit to a specific target for consumer price inflation, then the biggest threat to the world economy. Unions and businesses howled, saying the move would kill growth and jobs. One property developer called for a rope on which to hang central bank chief Donald Brash. 

Brash, a former fruit farmer who had seen his uncle’s life savings destroyed by inflation, held firm. By signalling the bank’s seriousness, the target helped to lower the public’s self-fulfilling expectation of endless price rises. Over two years, inflation fell from 8 to 2 per cent. The unpopular idea caught on. Soon, most central banks had adopted targets and this helped tame the global scourge of runaway prices for food, fuel and other consumer staples.