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Home / Business / Economy / Official Cash Rate

Fran O'Sullivan: Adrian Orr breathes new life into influential role

Fran O'Sullivan
By Fran O'Sullivan
Head of Business·NZ Herald·
12 Dec, 2017 04:00 PM4 mins to read

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Herald Business Editor at Large, Liam Dann, assesses the appointment of Adrian Orr as Reserve Bank Chief. Video/ Hamish Fletcher

It's notable that one of New Zealand's highest paid public servants Adrian Orr will "take a haircut" when he becomes Governor of the Reserve Bank next March.

Orr's pay cut probably won't satisfy those who demonised him — and the NZ Super Fund board — when his CEO's salary was hiked to $1.217 million in the year to June 30, 2017.

But becoming New Zealand's leading central banker is the role this long-time public sector careerist has been targeting for a very long time.

The status and the influence he will wield over NZ's economic prospects will more than offset any salary sacrifice Orr will incur.

Job Description: Governor of the New Zealand Reserve Bank — Dormouse need not apply.

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That's how I headlined my column when Graeme Wheeler announced he would not seek a second term in what arguably the most influential (if unelected) role in New Zealand outside that of the Prime Minister or Minister of Finance.

Orr is certainly no dormouse.

He is at once both an internationalist; but he is also a public servant who exhibits a strong nationalistic streak.

The story of how as Reserve Bank deputy governor he faced down former Australian Treasurer Peter Costello, when the latter wanted to bring the prudential supervision of New Zealand's financial institutions under Australia control, is legend.

At the time, Orr was also head of financial stability at the central bank reporting to then governor Alan Bollard.

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Costello's treasury officials were amazed that anyone — particularly a mere Kiwi — could give it back to their somewhat lofty boss.

Bollard — who was also part of a Wellington-based pushback against Costello's drive to assert supremacy across a range of transtasman areas from prudential supervision to competition regulation — allowed his more impetuous subordinate his head.

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There are other such stories dating back to Orr's period at the Reserve Bank which suggest his singular approach could at time rub backs the wrong way.

But he established sufficient street cred in financial and governance circles to be appointed to lead the NZ Super Fund which provided him with the opportunity to hone his managerial skills. It is those skills he will need to bring to the fore as he seeks to breathe new life into the rarefied climes of the central bank.

Orr is sufficiently steeped in central bank etiquette not to say anything publicly about his new role until he moves back to the Reserve Bank's HQ in Wellington next year.

But the NZ commercial community, journalists and the "public at large" should expect him to bring a freshened perspective after successfully running the super fund for the past decade.

Unlike his predecessor, who favoured background briefings with select journalists, Orr must be accessible. He has strong communication skills — although he can at times be seen as unwelcomingly frank — but this is not bad thing after Wheeler's extraordinary reticence.

It will be important that he asserts his dominance over senior staff rather than allowing them to control play when it comes to dealing with newsmedia. Particularly, as Orr becomes governor at a time when the Labour-led Government is determined to introduce significant changes to the monetary policy regime in New Zealand.

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Finance Minister Grant Robertson has outlined he will sign a Policy Targets Agreement with Orr in March 2018 before he takes up his appointment.

"The Government announced a review of the Reserve Bank Act in November. The work on the first phase of the review, dealing with the objectives and decision-making processes, and role of the board, will be substantively completed by the end of March.

As Robertson's press statement said, "While it will not be possible to pass legislation to amend the Act to reflect any changes from the review before the PTA is signed in March 2018, we will ensure that the new PTA is developed in a manner consistent with the direction of reform."

The real test will come when the Reserve Bank and the Government find themselves at points of disagreement.

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