At every opportunity this week – a press conference, a radio interview, a select committee appearance – he’srefused to admit any errors. In truth, he’s made a few.
This week’s cut to the official cash rate wasn’t one of those mistakes. That - thank the Lord - was exactly the right thing to do.
New Zealand is probably in its third recession in two years.
Consumer spending is falling back in a drop not seen since the 1980s share market crash, and maybe even as far back as the late 1970s.
The number of trucks on the road has slumped by the biggest fall ever seen outside of the Covid lockdowns.
The OCR cut had to happen. The economy needs a break.
Reserve Bank Governor Adrian Orr during the Monetary Policy Statement press conference on Wednesday. Photo / Mark Mitchell
No, Orr’s mistake was that he didn’t realise soon enough how bad it was.
In May, he somehow misread this suffering economy so badly that he thought (and told us) what we needed was another OCR hike to strangle it some more.
Going from that threat - to then cutting the OCR in just three months - is serious whiplash.
Three months ago his Reserve Bank predicted the economy would grow by 0.1% last quarter and 0.3% this quarter. Now it’s predicting the opposite: contractions of 0.5% and 0.2%.
Three months ago the central bank told us they’d cut in August 2025 at the earliest. They cut this month. They were wrong by a year.
SPQR is one of several high-profile Auckland businesses to have shut down. Photo / Alex Burton
There is no explanation for how they got things so badly wrong.
Even in May they already knew that they would have done their one job, which is keeping inflation between 1% and 3%, by the end of this year. That means they didn’t need to threaten a hike.
Orr’s other mistake was fuelling inflation when it was already out of control.
It’s mind-blowing that he was still pumping cheap money into banks as late as December 2022. By then, inflation was already at 7.2%. It had been too high for a whopping 18 months already.
The price we’re paying is the recession Orr’s engineered in order to fix what was partly his own mistake.
While we’re going backwards, global economic growth is 3.2%. According to Auckland University economics professor Robert MacCulloch, we are one of the slowest growing countries on the planet. We rank 183rd out of 190 economies. Below us are three countries in civil war and a few cot cases.
But Adrian Orr insists there was no flip-flop, no turnaround, no error.
Those who know the man suggest it’s in his nature to fight his corner. And it might work for him to some extent.
There will be those who buy Orr’s story that things just changed so rapidly from May to August that it forced him to do a screeching turnaround.
But he won’t convince the people who understand what’s happened here and they are ultimately the people who matter: those who make a living off money matters, who commentate on the economy and who will help write New Zealand’s economic history.
In the last three months, Orr’s mistakes have done his credibility (and the Reserve Bank’s) significant damage. Pretending it hasn’t happened only undermines that credibility further.
He might not want to admit any errors but you can’t get around this: Adrian Orr will go down in history as the Reserve Bank Governor who deliberately forced NZ into not one, but three recessions.
