RBNZ Board assures Robertson Orr will promote a ‘safe environment for debate’

Outgoing and incoming Reserve Bank boards unanimously supported Adrian Orr's reappointment as Governor. Photo / Mark Mitchell

An “intuitive leader who has demonstrated his ability to drive change”.

This is how Reserve Bank Board chairman Neil Quigley characterised Adrian Orr, when he in September told the finance minister that both the old and new boards unanimously supported Orr’s reappointment as governor of the central bank.

“The governor will also model the highest standards of behaviour in promoting a safe environment for debate and in treating with respect those people with different views from their own, consistent with Public Service Commission guidelines,” Quigley added in his letter to Grant Robertson, which was made public under the Official Information Act.

Robertson, the following month, recommended the governor-general reappoint Orr as governor for a second five-year term, effective March 27.

The decision created a fair bit of public debate.

National’s finance spokesperson Nicola Willis in September wrote to Robertson to voice her opposition to Orr’s proposed reappointment.

“Inflation is at a 32-year high of 7.3 per cent,” Willis said.

“It has now been outside the 1-3 per cent target range for five quarters and the Reserve Bank forecasts it will remain outside that range for another two years.”

Meanwhile Act leader David Seymour had “no confidence” in Orr, saying he believed the Governor had shown “poor leadership throughout his term, punctuated by high staff turnover and a failure to accept any responsibility for these issues”.

The Reserve Bank lost 10 of its 26 most senior staff (excluding Orr) in late-2021/early-2022, amid an organisational restructure.

Seymour, in a November press release, said, “When appearing in front of the Finance and Expenditure Committee last week he [Orr] refused to accept the Reserve Bank has gotten anything wrong, despite massively overstimulating the economy, causing consumer price inflation, asset price inflation, inequality, and now higher interest rates.

“He also carried out an extensive and expensive review into New Zealand banks’ conduct and found nothing of note but refuses to admit as much and claims changes are still necessary.”

Nonetheless, Robertson ignored these complaints, saying “stability and continuity” at the central bank were paramount given the global economic conditions.

“Adrian has demonstrated the skills, knowledge and experience to help steer the financial system through the 1-in-100-year economic shock of the pandemic,” he said.

Quigley told Robertson that not only did the Reserve Bank’s new governance board, which only became operative on July 1, unanimously support Orr, but so too did its outgoing board.

The outgoing board recognised the Reserve Bank’s “many institutional achievements” under Orr’s leadership.

These included its revision of bank capital requirements, a timely review of money creation programmes that “supported a vigorous monetary response to the pandemic”, an effective response to a data breach that affected the bank, the successful implementation of a new payments system, and the introduction of a new communications approach, designed to make the bank relevant to the general population, “including Māori”, and ensure data that supports “transparency and competition in financial services” is accessible online.

Quigley said the outgoing board also noted Orr helped operationalise the Monetary Policy Committee.

“As chair of this committee, the governor has consistently demonstrated his long experience and deep understanding of monetary policy,” Quigley said.

He noted the outgoing board passed its assessment on to the new board, which concluded the Reserve Bank had been through a period of “very considerable change in strategy, people and culture”.

“The governor has been instrumental in leading this change at the bank, which was needed at the time that he was first appointed,” Quigley said.

“The governor’s key tasks for the future are to ensure that these changes are bedded into the bank, that coherence and intellectual rigour are built around strategies outside monetary policy, that the leadership team operates in a cohesive way…”

An outgoing board member, Chris Eichbaum, confirmed to the Herald the old board went through a “robust and exhaustive”, “backward and forward-looking” process before coming to its decision to endorse Orr.

Under the Reserve Bank Act 2021, “The minister may recommend that the Governor-General appoint a person as the governor only if that person has been nominated by the board.

“The minister must consult with representatives of other political parties in Parliament before making the recommendation.”

Willis, who said she was “appalled” by Orr’s reappointment, believed it wasn’t enough for Robertson to lean on the endorsement of the board.

“He [Robertson] should have kicked off a thorough external review to satisfy himself and New Zealanders that the bank did the best it could have. Instead, he has directly shied away from any semblance of accountability.”

Nonetheless, Robertson said, “I have full confidence that he [Orr] will continue to display the same integrity and leadership in performing his duties as governor in what is still a challenging environment.”