Adrian Orr departs RBNZ still congratulating himself

[Opinion] Adrian Orr’s surprise resignation as Reserve Bank governor three years before his current five-year term ends will be celebrated by many observers and likely every Australian-owned bank chief executive and all their senior officers and directors.

Wednesday, March 5th 2025, 3:25PM 1 Comment

by Jenny Ruth

But what’s more surprising is that he has hung on so long; two of the three parties making up the current coalition government had made it abundantly clear in November 2022 that they were opposed to his having been reappointed for a second five-year term.

There were ample grounds to justify dismissing him; he was expressly charged with containing inflation between 1% and 3% and inflation was outside that range for all three of the years ended June 2024, peaking at 7.3% in the year ended June 2022.

While inflation did return to the target range in the year ended September last year, it has taken what some have called an even worse recession than during the global financial crisis – in that September year, per-capita GDP fell 2.1%.

Economist Shamubeel Eaqub has said that the economy has essentially been in recession since September 2022 on a per-capita basis.

More galling for most observers has been Orr’s refusal to acknowledge RBNZ’s failure at its most important job except on the odd occasion on which he downplayed the central bank’s role.

Many were deeply disappointed when finance minister Nicola Willis last year reappointed RBNZ chair Neil Quigley for another two years.

Quigley has been on the board since 2010 and chair since 2016 and so appointing a replacement would not have been unusual, especially for a new government.

It wasn’t only on the monetary policy front that Orr has been widely criticised; he role as head of our banking regulator has been sharply criticised.

Capital questions

Our four major banks were already better capitalised than their Australian parents when Orr determined in late 2018 that they would effectively have to double their capital.

Orr had inherited the capital review, which had already been underway for some years when he joined RBNZ in March 2018.

As I’ve previously reported, as late as November 2018, RBNZ had been working on the basis that our banks needed to be well-capitalised enough to withstand a one-in-100-year financial catastrophe.

We know that because a paper written by then RBNZ officer Susan Guthrie had been published on RBNZ’s website that was based on that one-in-100-year scenario.

But barely a month later, RBNZ had doubled that to banks needing to withstand a one-in-200-year event in its draft capital proposals.

The reason for doubling that period was obvious; if the target had remained at one-in-100-years, our banks wouldn’t have needed any more capital.

Clearly, Orr had pre-determined that the banks would have to greatly boost their capital.

When the rule were finalised in late 2019, the requirements had been slightly watered down and then their implementation was delayed because of the covid pandemic and now the banks have until July 1, 2028 to achieve the new capital targets.

But more than his failures at performing his official duties, Orr’s behaviour has often lacked the decorum normally expected of the holder of such a powerful position.
When Willis was still opposition finance spokeswoman, Orr was frequently openly hostile and rude to her during his appearances before parliament’s finance and expenditure committee (FEC) meetings.

More self-congratulation

And he subjected the former FEC chair Stuart Smith to similar treatment last October.

Smith had asked Orr to explain RBNZ’s “180 degree turn” between its May and August forecasts.

In May last year, Orr was talking about hiking the official cash rate (OCR) and that the first cut wouldn’t happen until the second half of 2025 at the earliest, but in August it cut the OCR by 25 basis points to 5.25%. (The OCR has since been slashed to 3.75% after three 50bp cuts when 25bp moves are the accepted norm for central banks.)

“I can't give any airtime to that comment,” Orr replied imperiously, obviously forgetting he was addressing the chair of a parliamentary committee who, if anyone did, owned the airtime Orr purported to be taking away from Smith.

What followed were increasingly rambunctious assertions including: “It's just wrong. There was no u-turn” and after more spurious assertions that Smith had got it wrong, “if people can't understand what that means, I'm not sure they should be commenting.”

The media release announcing Orr’s departure on March 31 provided no reason for his resignation but did contain more of his habitual self-congratulation when humility would be more appropriate.

“I’m incredibly proud of the RBNZ’s people, our work and the impact of our mahi [work] on all New Zealanders.”

Few New Zealanders, I suspect, would think our long recession was anything to be proud of.

Tags: Adrian Orr Opinion Reserve Bank

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Comments from our readers

On 5 March 2025 at 3:42 pm Amused said:

Adrian Orr’s tenure as Reserve Bank Governor will go down in history as one of New Zealand’s worst public servant appointments ever made.

Its acknowledged now by most economists that under Orr’s leadership the Reserve Bank's decision to keep interest rates too low for too long during the pandemic was the key cause of house prices getting out of control in New Zealand.

Orr and the Reserve Bank were then forced into crashing the NZ economy which included the introduction of debt-to-income ratios which now impose artificial restrictions on the amount banks can lend to home buyers based on their income.

To anyone with even the most rudimentary understanding of how banking works, the outcome of such a rule should be obvious – the first people banks will cut lending to are those on low incomes, making it even harder than it already is for first home buyers to get onto the property ladder.

I can’t recall a Reserve Bank Governor in New Zealand that has ever received more public criticism from former Reserve Bank senior staff. Most this criticism has been entirely justified when you look at how the Reserve Bank in Australia has been led by comparison these last few years including during the pandemic. Orr seemed more concerned with climate change and Te Tiriti o Waitangi than focusing on what a central bank’s core responsibilities are supposed to be i.e. combating inflation and keeping an eye on Government spending.

Orr had the typical arrogance of a senior public servant official, refusing to accept that he made mistakes whilst earning a huge salary courtesy of the NZ taxpayer.

History will not be kind to this man, nor should it be.

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