The Reserve Bank of New Zealand (RBNZ) is considering whether it needs to be given more guidance on how it balances meeting its inflation and employment objectives.

It's asking the public for feedback as a part of a five-yearly review it's required to do by legislation of its monetary policy remit.

While the outcome of the review will affect the way monetary policy is set between 2023 and 2028, the issue of how the inflation and employment targets are weighted is topical.

Debate is under way among central bank observers over whether a focus on the employment target led the bank to overcook its response to Covid-19, and whether the RBNZ should aggressively hike interest rates to get on top of inflation or be more mindful of not spurring too many job losses.

The National Party is campaigning on removing the employment target.

The RBNZ's Monetary Policy Committee is tasked with ensuring "maximum sustainable employment" is achieved, and annual consumer inflation of between 1 and 3 per cent in the medium term.

It uses tools like the Official Cash Rate (OCR) and quantitative easing or tightening to achieve these goals.

The RBNZ, in a consultation document, said the inflation and employment objectives align in the long term.

"Returning inflation to target is consistent with the economy and employment operating at their maximum sustainable levels," it said.

"In the short to medium term, however, there may be situations where monetary policy faces a trade-off between price stability and maximum sustainable employment.

"Inflation can increase due to factors that have nothing to do with the underlying level of demand in the economy, such as when global oil prices increase. Such 'cost push' shocks can have negative impacts on household incomes – reducing output and employment – yet at the same time put upward pressure on inflation."

The RBNZ noted that if it responds to high inflation by hiking interest rates, this could dampen the economy and create job losses. But if it prioritises employment by keeping interest rates low, inflation could rise.

The RBNZ said the upside of there being no guidance around how it should balance these objectives is that it can be flexible.

On the other hand, more guidance could "enhance credibility by providing more certainty to the public on how the Monetary Policy Committee will respond to different economic situations".

The RBNZ said including more guidance could also make the committee more "democratically accountable".

It concluded: "The remit could be extended to reflect the Monetary Policy Committee's current understanding that inflation forecast targeting is generally the best approach to achieving the dual mandate, and/or include more guidance on how to balance the economic objectives when they are in conflict."

The remit review asks the public for feedback on a raft of other issues related to the way the RBNZ sets monetary policy.

It asks whether people think the inflation target is about right, how the RBNZ should go about supporting maximum sustainable employment, and how relevant house price sustainability, climate change and distributional outcomes of monetary policy are.

The public has until July 15 to make submissions.

The RBNZ will use this feedback to inform a second round of consultation later in the year.

It will then also seek views on the Monetary Policy Committee's charter – the document that sets out the Monetary Policy Committee's meeting processes.

The RBNZ's advice will go to the Minister of Finance in 2023 for a decision on if, and how, the remit and charter will change from 2023 to 2028.