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Bay of Plenty Times

NZ Reserve Bank governor Adrian Orr in Tauranga: Time to take foot of accelerator

29 Jul, 2021 09:25 PM3 minutes to read
Reserve Bank Governor Adrian Orr. Photo / NZME

Reserve Bank Governor Adrian Orr. Photo / NZME

Kiri Gillespie
By
Kiri Gillespie

Assistant News Director and Multimedia Journalist

VIEW PROFILE

The Governor of the Reserve Bank of New Zealand has sage advice for some of Tauranga's most influential people - keep a laser focus on legislation likely to give the Government more control of the independent central bank.

Adrian Orr presented to more than 100 of the city's business and political leaders at the Tauranga Yacht and Powerboat Club today as part of a free Urban Task Force event.

Orr spoke of the challenges facing the Reserve Bank, including the potential ramifications of legislation making its way through Parliament.

The Reserve Bank of New Zealand Bill proposes to modernise arrangements by introducing a governance board and requiring the Minister of Finance to issue a Financial Policy Remit that the board must have regard to.

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The Bill is expected to be enacted in the second half of 2021 and reforms are likely to take effect from mid-2022.

"There's a real desire for us to be transparent and fit for purpose while also maintaining the operational independence (that's there). That's what people should keep a laser focus on," Orr said.

Orr said the political independence of the Reserve Bank was important because its influence could have lasting impacts transcending the length of whatever political term a minister of finance may last.

"It's about a single long-term focus, he said."

Cryptocurrency like Bitcoin and climate change were other areas he was keeping a watchful eye on, he said.

"The financial system will be directly impacted (by climate change). If you can't insure something, you can't borrow against it."

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Priority One chief executive Nigel Tutt. Photo / NZME
Priority One chief executive Nigel Tutt. Photo / NZME

When asked by someone in the audience what interest rates were doing, Orr said there had been a long period of "undershooting".

"We've had this massive economic shot with Covid. We've seen dramatic cuts in interest rates ... bringing forward spending. But we are coming to the beginning of the end of that."

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Orr said it was a speech he would not be able to give in any other country but now was the time for questions of "when", "how" and "should" interest rates be normalised.

"Do we need to be restricting more people buying (houses) hour of fear-of-missing-out behaviour going on?"

Orr reminded the crowd that a neutral interest rate was 2 per cent and New Zealand's Official Cash Rate was right now 0.2 per cent.

"So a .25 rise is not a big rise. We are still just taking our foot off the accelerator."

Orr said a neutral rate was exciting for business but "could be upsetting for overall economic wellbeing."

Priority One chief executive Nigel Tutt said Orr's presentation was reassuring as it confirmed New Zealand's economy was in "really, really good shape".

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"The sad fact of having a low-interest rate has meant the housing market has gone up at levels most people aren't happy with but everything else bodes really well," Tutt said.

"Covid is still a worry to the economy but less so here than anywhere else. I was also reassured with the state of the economy. We can think about taking the foot off the accelerator, which is hugely positive."

Orr was brought to Tauranga as part of a speaker series organised by Mana Taiao Events and the Tauranga Maori Business Association. Earlier this month, the series featured Productivity Commission chairman Dr Ganesh Nana.

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