Reappointed Reserve Bank Governor Adrian Orr in eye of 'pandemic induced inflation storm'

9:02 pm on 8 November 2022
Reserve Bank governor Adrian Orr.

The government today announced that Adrian Orr would be reappointed for a second five-year term as governor of the Reserve Bank of New Zealand. Photo: RNZ / Dom Thomas

Analysis - Some 20 years or more ago on a grey Wellington summer afternoon I emerged blinking from a mid-afternoon showing of the movie Lock, Stock and Two Smoking Barrels, a darkish comedy-crime caper about a group of London wide boys who need to find half a million pounds to get a gangster boss off their back.

Emerging from the same barrage of bad language, gunfire, and gratuitous violence with a joke or three from the same film was Adrian Orr, with whom I'd spoken often in covering economic and finance stories.

"Not bad ... but not like the real thing," he quipped. "We bankers don't need guns to get the money."

Orr has never fitted the buttoned down, scripted image of an economist, but it clearly has been no impediment to advancement from Westpac to Deputy Governor of the Reserve Bank of New Zealand, then the NZ Super Fund, and after a decade to the top job at the RBNZ in 2018.

Informal, colourful, free speaking, sometimes rough and irreverent, Orr was a contrast to his more reclusive predecessor, Graeme Wheeler, although not without a prickliness and terse retort when pressured.

He's provided the strong leadership for which he was lauded on appointment by Grant Robertson in late 2017 in revamping the RBNZ's operations, including the formation of a monetary policy committee to remove the governor's previous sole statutory decision making on interest rates.

The shake-up at the RBNZ saw the inevitable restructuring of operations, the departure of long-serving senior staff, for which Orr's sometime abrasive style has been partly blamed.

The RBNZ's venturing into climate change, has led to criticism the RBNZ should stick to the knitting of fighting inflation, although more than a hundred other central banks have joined the trend.

Non, je ne regrette rien

Now Orr finds himself in the eye of the pandemic induced inflation storm, as the RBNZ's "least regrets" pandemic policies of bond buying, and cheap money to banks are now blamed for the 32-year-high inflation, and a surge in house prices.

At least he's not alone, central bank heads in a score of other economies are in the same predicament, facing similar criticism, and he has been given some faint praise amid the damning for raising the official cash rate ahead of the pack.

Opposition parties have been demanding an inquiry into the RBNZ's actions since the middle of the year and former governor Wheeler joined the free market think tank New Zealand Initiative in September with a studied broadside for the tactical approach of global central banks to the pandemic.

Orr and the RBNZ rightly need to be questioned for the consequences of their policies, despite there being few dissenting voices when they were implemented as the pandemic hit in 2020.

The strength of consumer activity, buoyant housing market, and resilience in the economy were too easily taken as a sign the policies were working, in the same way the growing inflation pressures were temporary, and then largely imported, and then caused by supply side problems the RBNZ could not influence.

Robertson said he had full confidence in Orr to carry on and bed in the considerable changes at the RBNZ and bring the needed stability and continuity needed in the current environment, and there is some logic to that. A re-appointment well before the end of the current term relieves financial markets and central bank groupies from fretting over a succession, and asking "if not him then who?"

And is there just a whiff of politics in reappointing the political opposition's current punching bag, before the RBNZ's self-authored review of its actions is published, and well ahead of next year's election?

Should the economy escape an ugly recession next year Orr may emerge as some clever pilot who managed the soft landing. If not, he has five more years to help pick up the pieces and repair the damage.

Asked in 2017 to comment on his predecessor's monetary policy actions, Orr said he hadn't "done any of that genius of hindsight analysis".

Will he be so lucky?

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