In a departure from accepted norms about the independence of the central bank and banking regulator, the leaders of New Zealand’s opposition National Party yesterday attacked the reappointment of RBNZ governor Adrian Orr.
Orr has been reappointed for another five-year term, effective from 27 March 2023.
Finance Minister Grant Robertson said, in light of the global situation, this was a time “when stability and continuity are paramount for the Bank”.
“The Reserve Bank has been undergoing a considerable period of change since Adrian’s appointment in 2018. The Reserve Bank of New Zealand Act 2021 came into force in July this year and has changed how the Bank operates and is governed. This has led to considerable change in the Bank’s strategy, people and culture,” Robertson said.
“As the Governor, Mr Orr has been instrumental in leading this change and his reappointment will allow him to carry on and ensure these changes are bedded in.”
But Opposition Leader Christopher Luxon and Finance Spokeswoman Nicola Willis described reappointing Orr without doing a truly independent review of his actions in 2020 and 2021 as a “serious mistake”.
An internally sponsored review (with peer review by international experts) by the RBNZ of its monetary policy over the pandemic is due soon, amid accusations it overstimulated the economy, resulting in a historic house price boom and fuelling inflation.
The Opposition leaders say that, in any case, Orr should only have been reappointed for a one-year term because most of his next term could be served under a National-led government, if Labour loses the 2023 election.
Willis and Luxon told reporters in Parliament that if they do win the election, they will immediately launch an independent inquiry into the RBNZ’s actions, including whether they inflated the profits made by the New Zealand subsidiaries of the Big Four Australian banks.
"It's absolutely hypocritical for Jacinda Ardern and Robertson not to have an independent review of the Reserve Bank and monetary policy actions that have contributed to large bank profits. They are actually marking their own homework at this point," Luxon said.
Willis said Orr had “signed off on an extraordinary programme of money printing and cheap lending that pumped tens of billions of dollars into the economy”.
"That programme directly contributed to house prices rising 28 per cent in one year, inflation rising to a 32-year high, and record bank profits. New Zealanders now suffering through a cost of living crisis are owed some answers. Was a more careful monetary policy approach warranted? Has the Bank fulfilled its mandate? Did Orr get it wrong?"
"I would immediately inquire into the impact monetary policy decision making has head how much has that money printing added to the bottom line for banks? How much have they benefited from really cheap lending? And how much of that is being passed on?" she said.
"It's extraordinary. The funding for lending program means that banks are still accessing really cheap cash. And I think New Zealanders who are paying very high interest rates or are worried about paying very high interest rates would be right