Reserve Bank Governor Anna Breman appearing before Parliament's Finance and Expenditure committee on her second day on the job. Photo / Mark Mitchell
Reserve Bank Governor Dr Anna Breman appeared calm and confident, as she was asked enquiring questions by Members of Parliament on her second day on the job.
Breman appeared before the Finance and Expenditure committee, alongside the Reserve Bank’s new board chair Rodger Finlay, for a routine annual review of the organisation today.
While the former deputy governor of the Swedish central bank wasn’t in a position to answer questions about the challenging year that was at the Reserve Bank, she provided an insight into the approach she would take going forward.
Breman provided safe answers to questions, stressing she would be “laser focused” on the Reserve Bank’s core mandate.
She said she would talk to fellow Monetary Policy Committee members about whether their individual views on monetary policy, including how to set the Official Cash Rate (OCR), should be made public.
A proponent of transparency, she stressed that any changes to the way monetary policy decision-making was communicated should be made in a way that was suitable for New Zealand.
Finance Minister Nicola Willis is open to considering publishing Monetary Policy Committee members’ individual views.
“In general, I’m in favour of more accountability and transparency in the way the Monetary Policy Committee delivers its functions. I want to have the discussion on the specific question with the incoming Reserve Bank governor,” Willis recently told the Herald.
“I think there are opportunities to revisit the Monetary Policy Charter.”
However, the Labour Party MPs who questioned Breman expressed hesitancy over this, noting that detailing the perspectives of all seven members of the committee could confuse the public and financial markets, and increase the likelihood of members being lobbied on how to vote.
Speaking to the Herald last week, the Reserve Bank’s outgoing interim Governor Christian Hawkesby said that the way the committee worked had evolved since its inception in 2018, with external members speaking more publicly, for example.
He was wary that detailing individual members’ views could be counter-productive, as it could encourage members to come to meetings ready to defend their views rather than being open-minded.
Breman also provided safe answers when asked about money printing – something the Reserve Bank did during the pandemic, when it wanted to soothe dysfunction in the bond market and provide the economy with more stimulus than could be provided by cutting the OCR, which was already near zero and couldn’t be taken in to negative territory for operational reasons.
She took the same approach as the Reserve Bank, saying it was good to keep large-scale asset purchases (i.e. money printing) in the Reserve Bank’s toolbox, but the OCR would be its primary tool.
Breman said the bank had to “be careful” when using this “unusual tool”.
However, she made the point that all crises were different, and it was difficult to know what the next crisis, and most suitable response, would be.
Breman and the Monetary Policy Committee will next review the OCR on February 18.
In coming weeks, the bank will unveil changes to the amount and/or type of capital it will require banks to hold.
While MPs on the Finance and Expenditure committee welcomed Breman, and tried to get a sense of where she stood on various economic issues, Labour’s finance spokesperson Barbara Edmonds asked a few probing questions on the bank’s handling of Adrian Orr’s resignation as Governor in March.
Finlay fielded these questions, having exercised the functions of chairman since August, when Neil Quigley resigned.
Quigley came under pressure from Willis, as the Ombudsman compelled the Reserve Bank to disclose more information about the circumstances around Orr’s abrupt resignation.
As it turned out, Orr’s resignation wasn’t just his “personal decision”. Rather, the board presented him with a letter of concerns before he stepped back from the role and then quit.
While Willis was critical of the board, she last week announced Finlay would serve the rest of his current term, until June 30, 2027, as chairman.
Willis told the Herald, she had confidence in Finlay “because he agrees with the need to lift the bank’s performance and understands what is required to do that”.
Finlay told the Finance and Expenditure committee that Quigley had been an “outstanding” chairman, a “very good friend” and his decision to resign was his own.
Edmonds questioned whether good friendships got in the way of good judgement. Asked whether processes had been followed appropriately, Finlay responded, “Absolutely”.
National MP Dan Bidois followed up, asking Finlay for assurance the board wasn’t a victim of “group think”.
“I don’t see any group think. I see really strong debate,” Finlay said.
He defended the board’s decision to make an initial government funding bid of more than $1 billion for five years, only to settle for $776 million - a sum Orr deemed insufficient.
Finlay noted the original bid, which Treasury had “significant” concerns over, was made very early in the piece. As the process went along, the board got more involved and looked at the pitch through a more granular lens.
Ultimately, the board, Reserve Bank staff and Treasury were comfortable with a lesser amount of funding than the initial pitch.
A major restructure has been completed at the Reserve Bank through the course of the year. The staff headcount is down from 688 to 554 people.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.