By Jason Walls
“If there are people put on earth to make Finance Ministers look interesting and charismatic, it’s Reserve Bank Governors,” former Prime Minister Bill English joked during his valedictory speech.
Central Bank Governors are not famous for their charisma – look no further than former Reserve Bank Governor Graeme Wheeler, who was there listening to English that night.
He laughed along, as no doubt his replacement, Adrian Orr, would have if he had been there.
In fact, Orr could well have been thinking, “challenge accepted.”
There is usually nothing much to laugh about when it comes to monetary policy, but at multiple times during Thursday’s Monetary Policy Statement (MPS) press conference, Orr had both staffers and journalists chuckling away.
It was the same story when he was addressing MPs later.
“Saved by the bell,” he quipped when a question about what he brings to the table as Governor came up in the select committee as the Parliament bells chimed, indicating the House was about to sit.
A chorus of laughter ensued.
But it’s not just his sense of humour that has got people talking – Thursday’s MPS marked a fundamental shift in the Reserve Bank’s approach to its communication.
“I think our challenge is to speak in plain English as opposed to a high-tech, scientific language around which only half a dozen people actually understand and even less are interested in,” Orr said.
He said it was the Reserve Bank’s job to explain things clearly for more than just a handful of economists.
Orr referenced recent surveys that showed the vast majority of Kiwis have no idea what the Reserve Bank is, or what it actually does.
“That’s a good thing on a Saturday at the football ground, but not necessarily a good thing if we’re trying to raise financial literacy and make people think harder about all the things that are important to the soundness and efficiency of a financial system.”
And it’s clear Orr does not sweat the small stuff – Thursday’s MPS had pictures to help illustrate how inflation works.
“It’s being able to explain the story simply and I think that’s a big challenge for us all,” he said, after apologising for the quality of the illustrations – “these are all we could get off our kids’ icons.”
A very happy market
The Reserve Bank’s shift in communication style has also been widely welcomed by economists, especially its approach to the Official Cash Rate (OCR) statement.
Traditionally, the first and last sentences of the statement are the most important.
At the top, the OCR decision and at the bottom, what the Reserve Bank expects to happen next.
But on Thursday, Orr shook this up.
“The Official Cash Rate (OCR) will remain at 1.75% for some time to come. The direction of our next move is equally balanced, up or down. Only time and events will tell.”
So unexpected was the change to put all the vital information in the first paragraph that some, such as BNZ Head of Research Stephen Toplis, initially missed the message completely.
But that is where the issues, albeit not that serious, began and ended.
Bank economists, it seems, could not contain their praise for the new Governor’s communication style.
“O is for Orrsome,” a Kiwibank note read, calling the statement “clever in its simplicity.”
ASB said it was an “Orrsome start” (you might be discovering a pattern here), with its Chief Economist giving the “clearer and readily understandable” statement “top marks.”
When speaking to MPs at the Finance and Expenditure Select Committee, Orr said he wants to be a Chief Executive more than a Governor and communication is a key part of that.
“We are very in the face of insurance and banks at the moment around a whole series of issues,” he says on prudential regulation.
“We need to speak out more about what those issues are, otherwise the dialogue is filled in by them.”
On Thursday, Orr very clearly shifted the dial on how the Reserve Bank plans to operate.
But could it be enough to make Bill English eat his words?