MNI INTERVIEW: RBNZ Reform To Depend On New Governor
MNI (MELBOURNE) - New Zealand’s government should take advantage of the sudden resignation of the governor of the central bank to reform an institution which has come under fire for its communications and sudden policy shifts, but the chances for an overhaul will depend on appointing fresh leadership, a former Reserve Bank of New Zealand economist told MNI.
The government should find a fresh, external macro economist to fill the role and drive change following Adrian Orr's resignation on Wednesday, said Michael Reddell, independent economic commentator and former special adviser, economics, at the Reserve.
Finance Minister Nicola Willis will name a temporary governor following the Board's recommendation on April 1, and Deputy Governor Christian Hawksby will step up in the meantime.
“If they lurch quickly to appoint Hawksby, then we'll see probably more of the same,” Reddell said.
EASING U-TURN
Orr, who had been first appointed in March 2018 and resigned without explanation, had been criticised for his aggressive tone when fielding questions from media and politicians, and for significant losses incurred on the RBNZ’s bond-buying programme during the pandemic. The RBNZ also made a surprise switch to easing last August, despite having insisted it would keep rates relatively high for some time.
“If the government is willing to make change with a new person, then yes, clearly I’d like to see it move more in the direction of the Bank of England with more openness, more MPC [monetary policy committee] members doing speeches, published votes,” Reddell said. He also recommended a more Reserve Bank of Australia-style model that hived off the RBNZ’s prudential functions into a separate organisation.
“I'd like to see them consider splitting the bank.”
The change in governor will allow the RBNZ to refocus its attention on research, he added, noting the bank’s staff numbers had risen significantly under Orr’s watch as the volume of research plummeted.
Orr’s resignation was out of character for a departing governor, particularly as the Reserve prepares for next week’s internal conference to celebrate 35 years of inflation targeting, which will feature prominent figures such as Ben Bernanke, Reddell said.
The government had last week told the Reserve to prepare for funding cuts, which may have prompted Orr’s move, while the Board may have turned on the governor due to recent comments to the Parliament's Finance and Expenditure Committee, Reddell suggested. The centre-right government renewed Orr’s five-year term following its election in late 2023, despite it campaigning on RBNZ reform.