New governor plots wider role for RBNZ
Adrian Orr tells Liam Dann he is approaching the job more as a chief executive than a traditional leader of a central bank
Expect to see new governor Adrian Orr broaden the Reserve Bank’s dialogue beyond monetary policy and inflation debates as he seeks to make it more relevant to a wider group of New Zealanders.
“We need to communicate better to a wider audience as to what are we doing, how we are doing it and how we are balancing things. We need a richer dialogue,” he said in his first interview with the Herald. “It’s a lot broader or I wouldn’t be here.”
Orr said he was approaching the job — which he started on March 27 — more as a chief executive than a traditional governor.
“I mean that in the sense that we have very smart policy people here. I don’t think having one additional policy person is going to make the difference,” he said.
“In terms of monetary policy statements, the purpose is well understood — decision-making and delivery. So there’s not a lot of drama in there. Which is good, that puts it in the right place.”
Most forecasts see the official cash rate on hold until at least the middle of next year.
“We need a broader view of what the central bank is really about. We’ve got an enormous amount of grey matter in here — that can be used more effectively,” Orr said.
“So what is global leadership in managing a small, open economy, what is global leadership in ensuring a sound financial system, what is global leadership in the delivery of the means of exchange?”
Orr said he was comfortable with the changes being implemented by Finance Minister Grant Robertson.
The Reserve Bank will move to a committee system for official cash rate decisions. The committee will consist of three internal governors and two external members.
“Personally, I wouldn’t be rushing to have more economists, you want sensible, well-rounded, intelligent people who understand the purpose for which they are there and are comfortable exercising their judgment,” Orr said.
He was also happy to see employment included explicitly as a consideration in the setting of interest rates.
The monetary policy tension between employment and inflation had always been there, he said.
“Talking about the elephant in the room doesn’t make it any bigger.”
It would remain vital to the bank’s credibility to stay on top of inflation, he said. But he also warned that it was no longer enough to just do that.
“The vast majority of people weren’t around or cannot remember a period of high inflation.”
The expectations around inflation were now no different to maintaining a stable banking system or supplying notes and coins.
“A lot of what we produce now are expected utilities. If we want to build reputational capital we can’t do that by doing the same thing over and over again.”
Orr said speculation on whether he’d be a more hawkish or dovish governor (more inclined to raise or cut rates) was naive.
“I’ve never had any idea on how I should be pigeonholed — if you’ll excuse the bird pun,” he said. “I think people get my concern for the environment, concern for people and concern for this country confused with someone who is just wanting to lower interest — I get that a lot.”
Orr said he wasn’t bringing any new “frameworks or theories” about how the economy works.
“You just have to take the context in and make the best decision at the time.”