Reserve Bank's acting governor expects 'smooth transition'

Reserve Bank deputy governor Grant Spencer expects his six-month caretaker role will be a "smooth transition," pressing ahead with a sizeable body of work already under way at the monetary authority and prudential supervisor.

Spencer will assume the role of acting governor when Graeme Wheeler departs on Sept. 26, just three days after a general election where recent polling has seen the Labour Party reassert its position as the dominant opposition party under new leadership. Finance Minister Steven Joyce judged the appointment of a caretaker as the most appropriate route to ensure the next government had time to choose a new permanent governor.

"I'm sure it will be a smooth transition with no major changes and that it'll be business as usual," Spencer told BusinessDesk yesterday. "It's not as though we'll be on autopilot, we'll be following through on the work we're doing and the initiatives underway."

The Reserve Bank has a fair amount on its plate including a review of the capital adequacy framework, finalising the bank outsourcing policy, a consultation on adding debt-to-income limits to its suite of macro-prudential tools, upgrading the central bank's settlement IT systems, and reviewing the findings of the International Monetary Fund's recent report on New Zealand's financial system.

Wheeler delivered his final monetary policy statement yesterday when he held the official cash rate at 1.75 percent and reaffirmed the track for the benchmark rate to stay unchanged until mid-2019 at the earliest. While legislation empowers the governor as the sole decision-maker, Wheeler has introduced an informal governing committee to make policy decisions, something the Labour party wants to enshrine in an overhaul of the act if it wins the September election.

The board advertised for a new governor in June, with applications closing in July, and will then make a recommendation to the finance minister who makes the final appointment. While that role isn't expected to be filled until after the election and formation of the government, Spencer still needs to find a new deputy governor, who will join the governing committee.

His own role as head of financial stability is being filled by Geoff Bascand, the RBNZ's head of operations, and Spencer said they're "thinking about that at present" and have advertised for the role.

Wheeler was reluctant to comment on his five-year tenure as Reserve Bank governor at yesterday's press conference, saying instead all will be revealed in an upcoming speech. He did say the Reserve Bank had a hand in underpinning economic and employment growth over the past five years, helping quell house price inflation and maintaining core inflation, if not the mandated consumers price index, between the 1-to-3 percent target.

"That's a pretty good outcome and a central bank can take some credit in those outcomes," Wheeler said. "It's not the whole story, far from it, there's an awful lot of other things happening, but I think the Reserve Bank has been pretty successful in many respects."

Wheeler also offered some advice to Parliament's finance and expenditure select committee yesterday, urging greater debate on lifting the country's productivity levels and accepting that New Zealand's economy is influenced "immensely" by international financial markets.

(BusinessDesk)