Reserve Bank Governor Adrian Orr resignation: No reason given for departure

• Reserve Bank Governor Adrian Orr is stepping down at the end of the month.
• He made the announcement today, three years before the end of his second five-year term.
• Orr didn’t provide a reason for his departure.

The rumour mill is turning, following Reserve Bank of New Zealand Governor Adrian Orr’s shock resignation ahead of his second five-year term ending in 2028.

The Reserve Bank (RBNZ) on Wednesday afternoon announced Orr would stand down as Governor immediately and depart the central bank on March 31.

Reserve Bank board chair Neil Quigley fronted the media at the Reserve Bank Museum in Wellington at 5pm.

Deputy Governor Christian Hawkesby will be acting governor until March 31, after which time Finance Minister Nicola Willis will appoint someone to the role for up to six months, on the recommendation of the RBNZ board.

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The RBNZ didn’t provide a reason for Orr’s sudden departure, unveiled the day before the RBNZ hosts a major international conference (attended by the likes of former Federal Reserve chair Ben Bernanke) to mark 35 years of inflation targeting.

Orr’s move comes as the RBNZ clashes with Finance Minister Nicola Willis over the amount of funding it receives from the Government.

It also comes as Willis considers requiring the RBNZ to change the way it regulates banks, including its controversial bank capital rules, to support more competition in the sector.

Speaking to media, RBNZ board chair Neil Quigley acknowledged there were “issues” the bank was working through.

“The board is in the process of finalising its submission to the minister about our next funding agreement,” he said.

“That conversation about funding has involved the normal challenges that you would expect and has been constructive.”

Speaking to the Herald last week, Willis suggested the RBNZ may need to trim its expectations over the amount of funding it receives, and may need to brace for a funding cut.

She wouldn’t elaborate on why Orr was leaving.

“This is a decision that the Reserve Bank Governor has come to. And it is therefore for him to characterise,” she said.

Willis said the secretary to the Treasury Iain Rennie had informed her the RBNZ board had been in conversations with Orr about a possible resignation.

She said she’d been aware of these discussions over the past few days.

Asked whether she had confidence in Orr’s conduct to date, Willis said, “Questions of that nature are for the RBNZ board and I’m not going to be on a commentator on them.

“I’m sure that over the next few days people will have all sorts of things to say about Adrian Orr’s tenure at the RBNZ.

“I’ve made my comments on the performance of the RBNZ quite clear as Opposition finance spokesperson, and I don’t intend to say anymore today.”

When in Opposition, Willis said she was “appalled” by then Finance Minister Grant Robertson’s decision to reappoint Orr governor for a second term, starting in 2023, without first completing an independent review of the RBNZ’s performance.

Inflation sat above the RBNZ’s 1-3% target range for three years under Orr’s watch, hitting 7.2% in the June quarter of 2022, before finally falling within target by the September quarter of 2024.

While Covid-era travel restrictions and the war in Ukraine limited supply in the economy relative to demand, the RBNZ was widely criticised for helping cause inflation by over-stimulating the economy.

In a statement, Orr said: “I leave the role with Consumers Price Inflation at target, and an economy in a cyclical recovery following the long period of Covid-related disruption.

“The financial system remains sound.

“However, there is much work left to do on the major multi-year strategies RBNZ is following. Ongoing focus and funding will be critical to these projects’ success.”

Orr won’t attend the conference the RBNZ is hosting.

The Herald was told it couldn’t attend in person, as there wasn’t enough room and it was being livestreamed.

RBNZ board chair Neil Quigley (who Willis reappointed to the role, despite her complaints about the RBNZ’s performance) thanked Orr for his leadership.

“Adrian has been critical to leading the institutional reforms needed to implement the new Reserve Bank Act, Deposit Takers Act, and Depositor Compensation Scheme,” Quigley said.

“In particular, Adrian has demonstrated resilience and fidelity to the Bank in operationalising the changes in governance and decision-making that followed from the creation of a Monetary Policy Committee with external members from 2019, and the Reserve Bank Act coming into force in July 2022.”

The new responsibilities the RBNZ has taken on under the new legislation has seen the organisation grow a lot.

The change also ruffled a feathers, with 10 of the bank’s 26 most senior staff leaving in late-2021/early-2022, including Deputy Governor at the time Geoff Bascand.

Coming back to Orr, the outgoing governor said: “We’ve advanced many major, multi-year programmes, to modernise and strengthen the RBNZ and the New Zealand financial system and led the implementation of strategies related to the future of money and cash, future of payment and settlements, financial inclusion, climate change, and Māori access to capital.

“I’m incredibly proud of the RBNZ’s people, our work and the impact of our mahi on all New Zealanders.”