Reserve Bank governor Graeme Wheeler would like to see a lower exchange rate, provided it could be achieved without damaging price and financial stability.
In a speech yesterday, the new governor would have disappointed many who have been calling for wider Reserve Bank powers in manipulating the exchange rate.
New Zealand's dollar has been hovering around US82c for several weeks, leading to calls for a rethink of the country's monetary policy - particularly in measures to lower the value of the dollar.
Mr Wheeler said foreign currency intervention was unlikely to have a sustainable effect on the kiwi, although it could have a short-term impact.
"The bank will remain vigilant on its criteria for intervention and will be prepared to intervene if all its conditions are met."
In order to achieve a sustained reduction in the New Zealand dollar, it would be necessary to alter the overall level and pattern of saving and investment in the economy, he said.
"In particular, it will be necessary to tackle our addiction of depending on foreign savings to finance our consumption and investment."
Monetary policy by itself could not deliver quick fixes to achieve and sustain more rapid economic growth, lower unemployment or maintain a lower exchange rate, Mr Wheeler said.
Other policies were central for achieving those results but when they were applied, monetary policy could be supportive of them.
Mr Wheeler noted that large central banks in many advanced countries were operating in new territory with unprecedented policy settings.
Price stability and financial stability remained the Reserve Bank's central objectives for monetary policy and prudential policy. Those provided the best framework for achieving stronger growth in output and employment in the longer term.
The recent Policy Targets Agreement reinforced the importance of price stability and introduced the goal of keeping future average consumer price inflation near the 2% mid-point of the 1% to 3% target range, he said.
Over time, attaining that outcome should help to anchor inflation expectations around the mid-point.
In the wake of the global financial crisis, central bankers and fiscal authorities were now more conscious of potential risks and possible flow-on effects to the banking sector, Mr Wheeler said.
The Reserve Bank had placed a high priority on strengthening New Zealand's prudential regime, including introducing macro-prudential instruments and having an open bank resolution capability in place.
"New Zealand does not require quantitative easing. The economy is growing at an annual rate of around 2% and the Reserve Bank has scope to lower interest rates if needed."
Westpac chief economist Dominick Stephens said Mr Wheeler's speech was not intended to provide guidance on near-term monetary policy.
Instead, it was much bigger and more important than merely the near-term outlook for the official cash rate, which was left unchanged at 2.5% on Thursday.
The speech set out Mr Wheeler's approach to central banking in today's world, Mr Stephens said.
"Mr Wheeler seems to be adopting a straightforward approach to monetary policy. Based on this speech, it seems that Mr Wheeler's view on the appropriate OCR will depend on the medium-term outlook for inflation. That outlook currently sits close to 2% so the outlook for the OCR at this stage is 'on hold'."
