Reserve Bank Governor Adrian Orr was under pressure to resign in February and may have been dismissed if he had not agreed to step down voluntarily.
Text messages released this week show Treasury Secretary Iain Rennie told Finance Minister Nicola Willis the Reserve Bank (RBNZ) board was considering removing Orr from his role.
Rennie said he had spoken with RBNZ board Chairman Neil Quigley on the evening of February 27, who had given Orr four days to respond to a “statement of concern on his conduct”.
“Neil's current thinking is that you could receive recommendation later next week unless a decision is taken to go down voluntary exit route,” he said.
A Treasury spokesperson confirmed this was referring to the RBNZ board having discussed the possibility it may formally recommend the Governor’s removal to the Minister.
Under the law, a Reserve Bank Governor can be removed for "just cause" such as misconduct, neglect of duty, or profiting from other interests while in the job.
If one of these conditions has been met, the RBNZ board can recommend the Finance Minister consult with the Attorney-General and then advise the Governor-General to dismiss them.
The law says this can happen as quickly as needed, provided the matter has been properly considered and the principles of natural justice have been followed.
Allegations unknown
Because the statement of concern was withdrawn as part of the employment settlement, we don’t know what allegations were made against Orr, whether they were accurate, or whether they meet this threshold. Orr hasn't spoken publicly since his departure.
It has been reported the former governor “lost his cool” in a meeting with Treasury officials and likely stormed out of a meeting with Willis in the weeks prior to his resignation.
Whether this was the alleged misconduct and whether it meets the ‘for cause’ threshold is not clear. Willis herself implied in a text the board was entering risky legal territory.
She replied to Rennie’s text saying, “Thanks for the update. I trust they have good legal advice”, and gave a thumbs up reaction when he named the senior lawyer RBNZ had hired.
Following Orr’s resignation in early March, the central bank claimed he had made a personal decision to step down after returning inflation into the target range.
In response to journalists' questions, Quigley claimed there were no conduct issues motivating Orr’s resignation.
However, Treasury’s text messages reveal Quigley and the board were privately preparing to have the Finance Minister dismiss the governor for just cause, if he wasn’t willing to resign.
Willis herself was aware of this preparation but didn’t correct the public record, apparently out of concern it could breach the terms of the RBNZ’s exit agreement negotiated with Orr.
On Thursday, she told reporters that if the board had made that recommendation she would only have “considered it” consistent with her duties under the law.
“I'd simply made it clear to the board that I expected them to manage [Orr’s behaviour] in accordance with their responsibilities,” she said.
When asked if the board had given Orr an ultimatum—to resign or be dismissed—Willis said she said she did not think that is how the RBNZ would characterise it.
Quigley himself resigned late last month.
Test of trust
In public remarks on Thursday, acting RBNZ Governor Christian Hawkesby said the central bank was facing a “test of trust and confidence” as a result of this public scrutiny.
“Trust and confidence in our economic institutions is what underpins our financial system and supports economic prosperity for New Zealanders,” he said.
“It's typical for the RBNZ to be ‘in the news’ for our policy decisions, publications and research. But for too long this year the RBNZ has been ‘the news’, following the departure of the Governor in March, the loss of our Board Chair in August, and everything in between.”
His reference to “everything in between” includes repeated efforts from journalists and opposition MPs to push the RBNZ to disclose the motivations behind Orr’s departure.
The bank only shared more of the story when forced under the Official Information Act (OIA) and after interventions from the Ombudsman, Treasury, and an anonymous whistleblower.
Hawkesby himself had an opportunity to share more details at his first Monetary Policy Statement as acting Governor in May when Interest.co.nz asked if the public story about Orr’s resignation was the full story.
Hawkesby said then he couldn’t keep track of all the details in the public domain and noted there were a number of OIA requests the bank’s staff were working through.
At a Finance and Expenditure Committee (FEC) meeting earlier that month, he was asked directly by Labour’s Barbara Edmonds whether the February 24 meeting was related to Orr’s resignation.
FEC chair Cameron Brewer, a National Party member, blocked the question and instructed Hawkesby to only answer as it related to the recent Financial Stability Report.
Hawkesby later said he couldn’t recall all the details of that meeting, which Treasury minutes show he left before the moment when Orr is said to have stormed out.
Eyes on inflation
In his public remarks on Thursday, the acting Governor sought to reassure market participants the ongoing saga wasn't distracting the policymakers from managing inflation.
“One of the things that gives me confidence that we are well placed to deliver on our mandate is the governance changes that we have undergone, as part of our own transformation over the past seven years,” Hawkesby said.
Previously, the Governor was the sole decision maker on monetary and regulatory policy. Now that function is carried out by a seven-person Monetary Policy Committee and the RBNZ board is responsible for prudential policy decisions.
“This governance structure means that in times like these with turnover in leadership, we have the continuity to push ahead with an ongoing emphasis on delivering our mandate.”
He concluded by saying: “We know that we need to work together with you with transparency and respect to continue to earn your trust and confidence."
13 Comments
Hopefully Willis's handlers have told her to reply "YES"
if asked would she have fired him......
Hoskins will find out no doubt
But of course central banks are independent
Yes, until they display thoughts that are too independent.
...Within the bounds set by parliament, which may include things like "don't empire build" and "don't make us look bad"?
Do not self identify as a tree, and assume the title of the Big kahuna?
Sound very much that Orr was Governor in name only. Treasury needs investigated too
So Orr 'resigned', but no doubt his lawyers are negotiating an exit package.
How does that work?
Different rules for people at the top?
Yes, he would have only resigned on condition of severance agreement..... this is common at that level
History shows he was Orrful. Over staffed, over budgeted, and under performing. Leaving rates so low for to long caused mass inflation and unleashed mass housing speculation. The damage of which will be felt for a decade.
Interference via the employment mandate from the loony left didn't help, but is no excuse.
And of course Labour/Robertson reappointed him as a poison pill months before the election they knew they would lose in a gross breach of decades of x party agreement on RBNZ governance.
Robertson knew he was leaving, and IMHO he should not have reappointed Orr
Trump stacks the Supreme Court, it's the same thing and done everywhere in Politics.
Orr was also no friend of the big 4 banks and initiated regulation and policy to reduce sovereign risk.
This needs to be understood to then fully understand the opinions of many in the sector, and the groups and parties that they support.
The additional capital he wanted banks to hold, would have reduced profits, and with that executive pay.... He was probably known in the traps as that fat prick at the RBNZ.
Bonuses are very personal.
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