They need to
know they can trust the institution responsible for ensuring the cost of living is kept at bay, their savings maintain their value, the interest they pay on their debt won’t fluctuate dramatically, and the banks and insurers they’re reliant on to protect their wealth won’t collapse.
They also need to know the Reserve Bank won’t be bullied into changing the Official Cash Rate (OCR) in accordance with a particular Government’s wishes.
The public needs to be able to trust one of the country’s most powerful economic institutions.
Both the Reserve Bank board and Willis have engaged in what looks like a cover-up of the circumstances surrounding Adrian Orr’s resignation as Governor in March.
First the public was told Orr’s sudden exit was a “personal decision”.
Then, on the back of a barrage of Official Information Act (OIA) requests, the bank said Orr quit because he disagreed with the board over the amount of Government funding to pitch for.
Then, after Treasury released documents the Reserve Bank wanted hidden, it became known that Orr lost his cool in meetings in the weeks leading up to his departure.
Then, after the Ombudsman got involved, the Reserve Bank said Orr stepped down a week before he resigned, as the board presented him with a letter of concerns.
Orr disputed parts of the letter, so the board agreed to bin it when Orr resigned.
What an evolution.
The Reserve Bank was subtly disingenuous through the process.
Before the Chief Ombudsman released his ruling, the Reserve Bank said he was investigating “a complaint”. In fact, the office was investigating numerous complaints.
When the bank released more information on Thursday last week, under the instruction of the Ombudsman, Reserve Bank board chair Neil Quigley said: “Apart from being late with our OIA responses, the approach we took in responding to OIA requests was a reasonable one to the requests and met the overall public interest by balancing transparency with privacy and other legitimate concerns.”
Quigley fell on his sword the following day.
One would have thought the powers that be would have realised it wasn’t a good idea to treat the public with contempt.
But no, the press release Willis issued announcing Quigley’s resignation mentioned none of the above.
Rather, it said: “Mr Quigley has decided that having overseen a number of key workstreams for the bank, now is the appropriate time for him to hand over to a new chair.”
Deja vu, much? Willis may as well have said Quigley’s exit was a “personal decision” related to no conduct or performance issues whatsoever.
Willis responded to requests for comment straight away, getting on the radio to say she raised concerns with Quigley over how the handling of Orr’s departure had tarnished the Reserve Bank’s reputation shortly before he stepped down.
She went so far as to say she would have asked Quigley to resign, had he not done so himself.
If Willis felt so strongly about the matter, why didn’t she get the Reserve Bank to clear the air on Orr’s resignation earlier? Why didn’t she ask Quigley to resign sooner?
Willis knew Orr stepped down before the public was told. She also knew the board presented Orr with a letter of concerns.
She had virtually the same information on Friday as she did six months ago.
The only thing that changed was that the public found out they had been misled.
Information was sucked out of The Terrace and the Beehive in dribs and drabs, bringing all involved into disrepute.
Willis had to stop the bleeding from all the cuts and be seen to do something.
Which brings one back to the issue of spin and optics. Willis argues she did what she could – raising her concerns with the board on a few occasions over the information it was releasing.
She says she couldn’t get involved in an employment matter between Orr and the board, or risk breaching the conditions of the agreement they entered into.
However, what ended up happening was that she watched the public be misled for six months until the Ombudsman stepped in.
The Reserve Bank board reports to the Finance Minister, who can hold it to account without interfering with the work the Reserve Bank needs to do independently of the Government.
Question marks hang over the fitness of the board, consisting of Rodger Finlay, Byron Pepper, Susan Paterson, Jeremy Banks, Philip Vermeulen and, more recently, Grant Spencer.
The Reserve Bank can’t tell the deposit takers and insurers it regulates what to do if it doesn’t have its own house in order.
It needs to show the public it understands that with power and independence come responsibility.
The Reserve Bank needs to prove it is an attractive place to work. Quigley’s leadership has repelled talent.
The restructure currently under way to unwind the hiring spree that occurred under Orr isn’t doing anything to boost staff morale.
Willis has an opportunity to help set the Reserve Bank on a better path forward, as she appoints a full-term chair and governor and fills other vacancies on the board and Monetary Policy Committee.
This morning, she wouldn’t say whether the Reserve Bank board had already given her its recommendation for who it believes should be governor, but said the process was well advanced.
Willis has the chance to show she is serious about supporting the integrity and independence of the bank.
Prime Minister Christopher Luxon could help by refraining from pressuring the Monetary Policy Committee to pull people out of their malaise with lower interest rates, and instead focus on what the Government can do to create a more prosperous economy.
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.
