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An extension of the Reserve Bank governor’s role would have been much fairer to allow a new appointment post-election, National says.
The party said it was shocked that Adrian Orr has been reappointed for a second term of five years.
It had wanted an independent review of the central bank’s performance before any decisions were made, and is unhappy with the process which has seen Orr retain the role.
The RBNZ’s board has reviewed the performance of Orr and the bank in general, but National’s finance spokesperson Nicola Willis said yesterday that review was akin to someone marking their own homework.
National’s leader Christopher Luxon said today the party had concerns about Orr, and an independent review should have been carried out to look at monetary policy decisions, such as printing money, to pump billions into the economy.
A “dispassionate” independent review was needed to understand how these decisions affected the cost of living, record inflation and banks’ profits before any reappointment was decided.
“Wouldn’t you want to understand exactly what we got right, what we got wrong, what we have learnt from it and then actually think through whether you want to appoint the governor again,” Luxon said on RNZ’s Morning Report programme.
Asked if he had confidence in Orr, Luxon said the review was needed before any decision was made.
He was questioned about his recent change of stance, given that he publicly disagreed with former finance spokesman Simon Bridges, who had said during his time in the portfolio he would not reappoint Orr.
Luxon said at the time that statements about the Reserve Bank governor could politicise the situation and undermine political and public confidence in him.
Today he said the Government should have followed former Prime Minister Bill English’s example and extended Orr’s appointment for a year.
“I think that would have been entirely appropriate, entirely fair and reasonable – should there be a change of government next year that the government gets to choose its own Reserve Bank governor.”
In a statement yesterday, Finance Minister Grant Robertson said the central bank had been going through considerable change during Orr’s first term and his reappointment would make sure the changes were bedded in.
“In light of global conditions, this is also a time when stability and continuity are paramount for the Bank. 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.
“I am happy to endorse the recommendation of the Board. I have full confidence that he will continue to display the same integrity and leadership in performing his duties as Governor in what is still a challenging environment.”
Financial consultant Geof Mortlock told Morning Report Orr’s re-appointment was an appallingly partisan act.
Mortlock, a former senior Reserve Bank official, said Orr should not have received another five years, and if the governor was failing to deliver inflation within the target band he should be held accountable.
“If you’re failing to deliver inflation within the target band, and some of that failure is judgement calls that you got wrong, it’s not all supply-side inflation, some of it demand-side inflation, shouldn’t you be held to account for that?”
He agreed with Luxon that a more appropriate decision would have been a 12-month appointment through to next year’s general election.
Adrian Orr was appointed in 2018 to succeed Graeme Wheeler, and his term was set to expire in 2023.
He is a former head of the NZ Super Fund, chief economist at the Reserve Bank, Westpac and National banks, and has also worked at the OECD and Treasury.
Orr has overseen the RBNZ expanding its scope, with monetary policy widened to include employment as well as inflation targets, taking climate change into consideration of policy, making banks hold more capital, tougher regulation of banks and insurance companies, and a broader engagement with te ao Māori.
His sometimes abrasive style has been blamed for the loss of senior, experienced staff.
However, greatest scrutiny has come from some political, academic and financial figures who have criticised the RBNZ’s handling on monetary policy at the start of the pandemic with bond buying, and cheap finance for banks for fuelling the hot housing market and current spike in inflation, and the subsequent response of ratcheting up interest rates.
Orr has responded that the RBNZ has taken a “least regrets” approach opting to do run the risk of doing too much rather than too little to support the economy and household.
A report on the RBNZ’s handling of monetary policy over the past five years is due out shortly, and the central bank is also consulting on the remits it operates under.