Reserve Bank Governor refuses to say whether he wants a second term; frames RBNZ's five-year inquiry report due in late 2022 as independent lesson-learning effort

Reserve Bank Governor Adrian Orr left his own future hanging in the air at the August Monetary Policy Statement news conference on Wednesday, refusing to answer any questions about whether he wanted a second term or whether his critic's should or will have a say over his future.

However, he suggested a detailed response to the critics and assessment of the central bank's performance would be published before the end of the year from an inquiry including independent overseas experts. That would be in time for a decision to re-appoint that may assuage the concerns of the Opposition, who are currently on track to be in Government as Orr's boss in just over a year, with over four years left in a second term for the Governor.

The clock is ticking for the Reserve Bank board, Finance Minister Grant Robertson and a potential National Government-in-waiting over whether Orr deserves or should get a second five-year term before it expires in late March next year.

The heat over what would normally be a routine and apolitical decision has intensified in recent weeks because of the trenchant criticism of the Reserve Bank's performance over the last three years under Orr, and a call for full independent inquiry from the National-led Opposition, who could be in Government only months into Orr's second term. That creates the potential for a dangerous standoff between the operator of monetary policy and the operator of fiscal policy.

Orr's predecessor as Reserve Bank Governor, Graeme Wheeler, a previous Reserve Bank chairman and grandee, Arthur Grimes, ex-Deputy Governor and Acting Governor Grant Spencer, and previous Reserve Bank Chief Economist, John McDermott, have all publicly criticised the bank's performance under Orr. They have argued it should not have kept printing $55b through late 2020 and 2021 to push down longer-term interest rates, and that it was at least partly responsible for inflation surging to 7.3% this year, well outside the Reserve Bank's 1% to 3% target band.

National Leader Christopher Luxon called last month for a full independent inquiry into the Reserve Bank's creation of a "tidal wave of cash" that he argued had fuelled the surge in inflation. He pointedly refused to say whether Orr should be re-appointed, saying he wanted the results of an independent inquiry first. 

Finance Minister Grant Robertson rejected Luxon's call at the time, describing Luxon as "Captain Hindsight" and saying he had confidence in Orr. Robertson also said he was working with the Reserve Bank board on the issue.

However, Orr has yet to say publicly whether he wants a second term. The issue emerged last year when Simon Bridges, then National's Finance spokesman, said he would oppose Orr's reappointment in the period shortly before the 'caretaker period' in the lead-up to an election.

Orr had not been in a position to answer questions publicly about the issue until Wednesday's Monetary Policy Statement. 

He was asked if he wanted a second term or had sought reappointment.

"I don't think that's something we should talk about. Why? Because I don't make that appointment," Orr said.

Asked what his own view was, given the board didn't decide whether he would reapply, he said: "I don't want to talk about it."

Asked if he didn't know if he wanted to be reappointed, he said. "I don't want to talk about it. Any other questions?"

A Reserve Bank-review alongside the Five-Year remit review

However, Orr made a point of specifying that a review of the bank's performance would be released publicly by the end of the year as part of the first once-every-five-years review of the Reserve Bank's new Monetary Policy Remit, which included a requirement to support full employment as well as targeting low inflation under changes to the Reserve Bank Act in 2018.

Luxon has called for the removal of the full-employment requirement.

Orr talked in the news conference about a two-step process in the five-yearly review, with an initial report including independent comment from overseas experts due before the end of the year, before a final review of the Remit early next year.

The overseas-expert-included review was painted as proxy for the independent review demanded by the Opposition. The Reserve Bank of Australia is currently facing its own independent review, which was ordered by the new Labor Government under Labor Treasurer Jim Chalmers.

Orr was asked if the review including overseas experts had been created after the Opposition's criticism. He denied that, saying it was included in the June 1 announcement of the legislatively-required five-yearly review, although was not a central part of the announcement.

"We are the most transparent central bank internationally. We offered that up free of charge in advance of recent statements. There's two legs to it. The first one is the remit itself. And part of that is a review of our monetary policy actions over the last five years. So that was announced publicly quite some time ago," Orr said.

The review by overseas experts was mentioned six pages into the consultation document with the five-yearly review, thus: "Alongside the Remit review, the Reserve Bank will undertake and publish a review and assessment of the formulation and implementation of monetary policy in the previous five years, which will be subject to external review."

Orr admitted the two-step process including the review by independent experts may not have been obvious to all.

"I know it's confusing because a review of monetary policy and a monetary policy review sound remarkably the same. So that review is of monetary policy of the past five years is part of that remit review. We are going to issue them separately so that people can have clear minds and focus because the first part that we'll put out is a review of our monetary policy activities," Orr said.

"We hope to have that out in full public glory. The second part would be our recommendations to the minister on any changes, if any, to the monetary policy remit. That second part will be in the new year."

The overseas review would be released before the end of the year. That would give the board and Robertson time to assess a second-term decision.

RBNZ Assistant Governor Karen Silk said former Reserve Bank of Australia board member Warwick McKibbin and former Bank of Canada Deputy Governor Larry Schembri were the overseas experts for the review.