Graeme Wheeler's legacy will be property lending rules

Reserve Bank Governor Graeme Wheeler arriving for his press conference in Wellington after announcing the Official Cash Rate in August. New Zealand Herald photograph by Mark Mitchell.

Reserve Bank Governor Graeme Wheeler will be remembered for the moves he made to try to curb the property boom, says Westpac chief economist Michael Gordon.

Finance Minister Steven Joyce confirmed today that Wheeler would not seek a second term and will step down on September 26.

"Wheeler did come in and he said, 'I lived in the US when the housing market collapsed and I don't want to live through that here'." Gordon says. "He was very much in favour of policies that would try and head a housing bubble off at the pass."

In partnership with deputy Grant Spencer - who will take over the top job on an interim basis - Wheeler introduced a series of loan-to-value ratio (LVR) restrictions in an effort to dampen the speculative activity in the heated property market.

"In terms of getting the policy implemented that's certainly his legacy," Gordon said.

In his preview of this Thursday's Monetary Policy Statement, Gordon highlighted uncertainty over the Governor's future as one of the most notable risks around monetary policy this year.

The other risk being the general election.

The first of those risks had been resolved by the Government appointing Spencer in the caretaker role for six months to March 2018, he said.

Markets took the news in their stride with the Kiwi dollar largely unmoved.

The renegotiation of the Reserve Bank's Policy Target Agreement has also been delayed for the six-month period.

While the key risk was a new Government that wanted to overhaul Reserve Bank policy, ANZ chief economist Cameron Bagrie speculated that the current Government may also be considering some sort of operational change.

"It could be a close election so it makes sense to give yourself some wriggle room and ensure a seamless process," Bagrie said. "But I do wonder if there could be a little bit more going on here."

The Government might look to formalise a committee-based decision-making process, he said.

"We have a single decision-making model in theory, but in practice it [the interest rate call] has been a group decision."

Bagrie said he felt Wheeler had done a good job as Governor.

"He's been prepared to take a stand," he said. "Like a lot of central bankers he's had to negotiate some very difficult waters. Hitting the inflation target is a real stretch when you have the New Zealand dollar up around these levels. But we have good growth and we have booming employment.

We have seen a housing boom but he's been a lot more proactive in managing the excesses of that. It's been a really tough balancing act. "

Wheeler has faced criticism during his term for the length of time inflation has been below the Reserve Bank's official target band of 1- 3 per cent.

December data showed it had moved back above 1 per cent for the first time in two years.

He has also faced criticism for moving too early to raise the official cash rate in 2014 - a track that was eventually reversed.

However, most economists now expect the rate to stay at its current level of 1.75 per cent for at least a year.

Wheeler will deliver a full monetary policy statement this Thursday.

In a statement today he said it was his "intention, when I was appointed, to serve one term, and then to take on governance roles".

Spencer will not seek the Governor's role on an ongoing basis. He had indicated his intention to retire this year but has agreed to defer in order to fill the acting role.