New Swedish Governor clears the decks for a more stable era at the central bank - Liam Dann

The appointment of Swedish economist Dr Anna Breman as Reserve Bank Governor represents the start of a new era for the central bank.

But economists say it won’t necessarily change the path for interest rates in the foreseeable future.

With Breman’s arrival on December 1, acting Governor Christian Hawkesby – former deputy to Adrian Orr – will depart.

From a management and political point of view, that will clear the decks after what has been an intense period of turmoil for the RBNZ.

Orr resigned abruptly in March after an alleged dispute over funding cuts.

After his departure, chairman Neil Quigley has resigned.

His replacement is still to be named.

Change at the top of the board and a change of Governor (effectively the chief executive of the central bank) means we should also expect to see some change in the way the RBNZ is run.

Funding cuts mean it will, by necessity, be a leaner operation.

We will likely also see more focus on core functions and less attention on issues like climate change policy – something Orr’s critics bemoaned as a distraction.

Speaking in Wellington today, Breman said the Bank would remain “a source of strength and stability for the New Zealand economy”.

“We will achieve this by focusing on our core mandate,” she said.

The three main areas of responsibility were price stability, prudential supervision to ensure financial stability and oversight of payment systems and currency, she said.

Breman also emphasised the need for “transparency, accountability and clear communication” at the Bank - something critics say has been lacking in the past.

But for those who watch the Reserve Bank primarily for its interest rate moves, the changes will likely be more limited.

For a start, the current Monetary Policy Committee will remain in place for the next two cash rate calls in October and November.

Based on current forecasts, the rate should be cut by 50 (or perhaps 75 basis points) to a low of 2.5% or 2.25%.

Either way, the last rate call with Hawkesby as Governor is expected to bring an end to the easing cycle, which means Breman hopefully will helm a new, more stable era for monetary policy as well as a new management regime at the Bank.

Secondly, as ANZ chief economist Sharon Zollner points out, the Governor’s influence on the Official Cash Rate is limited by the committee structure.

“The RBNZ’s remit, charter and MPC [Monetary Policy Committee] code of conduct prescribe the framework, and ultimately, the data will decide where the OCR goes.”

The committee structure also meant the Governor was only one vote at the table, she said.

The Governor only votes when the Committee cannot reach a consensus; although in the event of a tie, the Governor has a casting vote.

“Past transitions from one Governor to the next have been relatively seamless from a monetary policy implementation perspective, and we would expect this one to be no different,” Zollner said.

For all that, there is an expectation that a Governor drives the culture and broad strategic direction of a central bank.

After the tensions of the Orr era, Finance Minister Nicola Willis will have almost certainly made it clear that culture change is part of the brief.

Finance Minister Nicola Willis and new Reserve Bank of NZ Governor Dr Anna Breman arriving for their press conference at the Beehive theatrette. Photo / Mark Mitchell

Breman, born in 1976, represents a new generation of central bankers.

She is also notably the first female to hold the role in NZ.

She is married with two teenage daughters. The whole family will move to NZ.

Willis described her appointment as “opening a new chapter for NZ history and a new chapter for the Reserve Bank”.

And Breman comes with a formidable CV.

She has a doctorate in economics and studied at Harvard as well as the University of Stockholm.

She began her career at the World Bank before joining the Swedish Ministry of Finance, then moving to Swedbank as a senior economist in the research department.

She was named group chief economist in 2015, and later also became head of macro research.

In November 2019, Breman was appointed deputy governor of the Riksbank for a six-year term.

She started that term on December 1, 2019, meaning it lines up perfectly with her NZ appointment.

Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.

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