MNI: RBNZ Leadership Woes Present Reform Opportunity

The departure of Reserve Bank of New Zealand Chair Neil Quigley offers the government an opportunity to reform the Bank’s operations, potentially recalibrating its independence and oversight, while also rebuilding trust with markets and the public after credibility was dented by former Governor Adrian Orr’s sudden resignation earlier this year and the handling of its aftermath, former officials told MNI.

Suzanne Snively, a former board member and chair of the independent experts panel that led the 2017–22 RBNZ Act review, said the government may revisit the balance between RBNZ independence and ministerial control, with Finance Minister Nicola Willis likely to reopen debate over governance structures that were examined in the 2017–22 Act review.

Quigley resigned on Aug 29 over his handling of former Orr’s sudden departure in March, which was driven by disagreements around the Bank's ballooning budget and capital adequacy rules. Willis said the Bank’s reputation was at risk and that she would have asked for Quigley’s resignation had he not offered it.

The recent turmoil underscored gaps in the RBNZ’s governance framework, Snively said, noting the review panel had recommended separating governance from operations, ensuring both an independent chair and an independent governor. Some level of tension between the two roles was healthy, she said, as differing perspectives helped strengthen decision-making. But the panel had not given enough attention to how disagreements should be resolved, leaving the system vulnerable when conflicts arose at the top, Snively continued.

Orr's departure followed 175 basis points of Official Cash Rate easing from its 5.5% peak reached in May 2023. The monetary policy committee has since eased a further 75bp. (See MNI RBNZ WATCH: MPC Makes Dovish 25BP Cut, Eyes 2.5% OCR)

CREDIBILITY HIT 

Don Brash, governor from 1988 to 2002, said future credibility will hinge on naming a strong governor, noting acting Governor Christian Hawkesby would be a safe choice. “If the person appointed as governor is good and the chairman is good, the bank can win back market confidence quite quickly due to the virtue of the New Zealand framework,” he said, adding that the government could apply pressure on governors who failed to meet inflation targets.

Brash urged the government to prioritise domestic candidates, noting recent talk that suggested offshore possibilities – particularly from the Bank of Canada – had been discussed. “If you haven’t got someone who’s competent domestically, then by all means appoint someone from offshore. But it’s hard for someone coming in without much background to the New Zealand economy to take on that role of authority.”

MPC DISRUPTIONS UNLIKELY

Snively argued Orr had built a strong research base that underpinned monetary policy committee discussions, despite criticism he had inflated staff numbers, which would ensure the official cash rate decisions were insulated from the leadership challenges. 

“The MPC is strong, the internal structures are strong … Adrian deserves a lot of credit for building up the strength of the operational side of the Bank,” she said. "Obviously we don’t want to go too long without a governor and a chair. But I honestly think that Hawkesby is a safe pair of hands and [Chief Economist] Paul Conway is able to lead the MPC to come up with strong decisions… I’m much more worried about the capacity within Treasury to be looking at the impact of government activity on the economy.”

She suggested Willis could draw on senior corporate leaders – including those with experience at her past employer, dairy giant Fonterra – as well as the university sector for candidates. Current board member and former Deputy Governor Grant Spencer could also step into the governorship easily, she said.