Adrian Orr named as new Reserve Bank governor

New Zealand Superannuation Fund chief executive Adrian Orr has been named the next Reserve Bank governor, starting in late March 2018. 

Finance Minister Grant Robertson announced the appointment today, which is effective from March 27, and based on a unanimous recommendation from the Reserve Bank board.

Mr Orr will take up the role as the new Labour-led administration stamps its own mark on the central bank with a review of its governing legislation. 

The kiwi dollar jumped to 68.87 US cents from 68.54 cents immediately before the announcement, which Robertson said would see Orr take a "significant pay cut" from his current role, which is paid around $950,000 a year and the then Finance Minister, Bill English, opposed in 2015 and constituted a 36 percent pay rise.

Orr's salary at the central bank would be "in the range of the current governor", whose most recent salary has been reported to be around $660,000 a year. Orr, who served as a deputy governor of the Reserve Bank until taking his current role at the Super Fund in 2007, replaces former World Bank deputy head Graeme Wheeler, who stepped down in September.

"Mr Orr has the technical and leadership qualities required to be governor and chief executive of the Reserve Bank," Mr Robertson said in a statement. "Further, I consider he has the skills necessary to successfully lead the bank through a period of change."

Mr Orr was a former deputy governor at the Reserve Bank before heading to the NZ Super Fund, which he's steered since its inception in 2007. 

Reserve Bank chairman Neil Quigley said Mr Orr had "significant breadth of knowledge across central and commercial banking, economics, financial markets and regulation" and with his executive experience at NZ Super Fund, was a unanimous choice for the board.

Mr Orr will replace Grant Spencer, who is acting governor for a six-month spell after Graeme Wheeler departed in September. 

Mr Robertson said he will sign a new policy targets agreement with Mr Orr in March, and by the time the new governor starts, the first phase of its review of the Reserve Bank Act will be substantively completed. 

"While it will not be possible to pass legislation to amend the act to reflect any changes from the review before the PTA is signed in March 2018, we will ensure that the new PTA is developed in a manner consistent with the direction of reform," Mr Robertson said.

Adrian Orr will become the 12th governor of the Reserve Bank. (Source: RBNZ)

"If necessary, the PTA will be revised again after the act has been amended to reflect any changes from the review that cannot be reflected within the provisions of the current act."

On Mr Orr’s salary, Mr Robertson says that’s a matter for negotiation between him and the board – “but the board chairman has told me that it will be within the range of the current governor, which – to state the obvious – will be a significant pay cut for Mr Orr.”

Mr Robertson adds that the new Reserve Bank governor is “delighted” to take up the appointment.

“He sees it as a great honour to serve his country in this role; obviously he was the deputy governor so he has spent time at the bank. It’s a role I think he’s very much looking forward to.”

Mr Orr was the first candidate the board suggested to Mr Robertson for the job.

As for what happens next for the leadership of NZ Super Fund, Mr Robertson says that will be a matter for the fund to deal with.

Westpac chief economist Dominic Stephens says the appointment of Mr Orr is a “balanced choice.”

While this is not an internal appointment, Mr Orr is closer to being a Reserve Bank insider than other recent Governors, Mr Stephens says.

“Neither of the past two Governors had ever worked for the Reserve Bank before they were appointed and Don Brash worked there only briefly as a graduate.”

Westpac has been “wary” of the dual employment, inflation mandate, as it says it could make it harder for the Reserve Bank to raise interest rates when inflation is too high.

“But with Adrian Orr as Governor, we would expect the Reserve Bank to remain realistic about what monetary policy can achieve in the long run, while at the same time paying more attention to employment over economic cycles.”