RBNZ Governor Adrian Orr expects to serve out his five-year term despite polls pointing to a change in government

Reserve Bank (RBNZ) Governor Adrian Orr does not have any plans to end his tenure if the Government changes after the election in October. 

Last year, Labour reappointed Orr to a second five-year term at the head of the central bank, despite opposition from the National and Act parties. 

Recent opinion polls show these two parties with enough support to form a government after October's election, although the race remains tight. 

A simple polling average shows National-Act winning about 62 seats, leaving the left-leaning bloc with just 58 seats. New Zealand First was still under the 5% threshold in the average. 

This result would likely see National’s Nicola Willis take on the role of Finance Minister with responsibility for the Reserve Bank. She has been highly critical of the Bank’s performance. 

Interest.co.nz asked Orr on Wednesday if he planned to serve the remainder of his term if the opposition parties were able to form the next Government. 

“I don’t have any comment on that. I’m employed for a five year term,” he said.

He was also asked if he expected to see any challenge to the RBNZ’s independence should there be a change in Government.

“Our legislation is written in law. Future governments can change the law. That’s all I can say. I think we are in a very strong position as a central bank, doing its job for Aotearoa New Zealand.” 

On Thursday, Willis said a National-led government would require the central bank to have its Covid-era decision-making independently reviewed. 

“It was one of the banks around the world that did the most money printing and we think there needs to be an objective assessment of how well that decision making was made.”

“We’ve had 27 months of inflation outside the target band. That cost of living crisis is really hurting New Zealanders and I’m disappointed about that.”

Willis said she respected the independence of the Reserve Bank and wouldn’t make any assessments of individuals until that review had been completed.

The bank has done its own five-year review of monetary policy, which found it should have begun to lift the Official Cash Rate earlier than it did. 

Committee combat

Earlier on Thursday, the RBNZ’s senior leaders appeared before Parliament’s finance and expenditure committee. 

Willis challenged the Governor over why the central bank had failed to correctly forecast how long inflation would remain at high levels. 

“What is going on here? …why is it taking so long to get inflation out of our economy,” she asked. 

Orr said there had been a series of supply shocks that had been hard to predict and counteract, but he was confident inflation pressures were easing now. 

“The other thing that strikes me is just how inaccurate the Reserve Bank’s forecasts have been,” Willis said. 

This time a year ago, the bank was forecasting the annual consumer price index would be 4.1%, almost two percentage points lower than it actually was in the June quarter.

Adrian Orr and Paul Conway, the RBNZ’s chief economist, said one reason for the gap was the inflationary impact of Cyclone Gabrielle. 

But Willis challenged them on this point, saying it was a stretch to suggest the cyclone was responsible for a two point differential in the inflation rate. 

She was proved correct a few minutes later, when Labour’s Anna Lorke asked them to clarify how much lower inflation would have been without Cyclone Gabrielle.

Rebecca Williams, the RBNZ’s manager of forecasting, was brought forward to answer the question and said the inflation impact was less than originally expected. 

“While it was definitely one factor, it was 0.1 to 0.2 percentage points,” she told the committee. 

Most of this impact was in fruit and vegetable prices, although it was not possible to measure its other impacts, such as on construction costs which have been running hot.