9 Nov 2022

Reserve Bank governor's job: New govt needs right to make choice - Luxon

11:03 am on 9 November 2022
Christopher Luxon

An independent review should have been carried out to look at monetary policy decisions before Adrian Orr was reappointed, Christopher Luxon says. Photo: RNZ / Samuel Rillstone

An extension of the Reserve Bank governor's role would have been much fairer to allow a new appointment post-election, National says.

The National Party says it is shocked by the reappointment of Adrian Orr for a second five-year term as governor.

National had wanted an independent review of the bank's performance before any decisions were made, and are unhappy with the process which has seen Orr reappointed.

The bank'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 Party leader Christopher Luxon said his 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.

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Adrian Orr. Photo: RNZ / Samuel Rillstone

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 Morning Report.

Asked if he had confidence in Orr, he said the review was needed before any decision was made.

Luxon 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 responded 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."

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.

He said if Orr was failing to deliver inflation within the target band, then 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 is 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 election.

Liability for industrialisation

Luxon has refused to say whether he believes New Zealand is liable to compensate developing nations for the damage caused by industrialisation.

New Zealand is to put $20 million into a fund to address loss and damage in developing countries at COP27 this week.

Luxon said he wanted to see the detail on that decision before commenting on it.

But the National Party leader said he did want to keep building on the strong relationship with our Pacific neighbours on climate change.

"I'd prefer the fact that we're actually helping our Pacific partners and friends and our family more directly.

"That has been where our focus of our conversation and partnership with the Pacific island nations has gone to in recent years and that's a really good thing and I think that needs to be turbo-charged."

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