National is criticising the long-term reappointment of the Reserve Bank governor, saying an internal review amounts to the regulator marking its own homework.
Adrian Orr’s reappointment to the position for a five-year term was confirmed by the government this morning, after the unanimous recommendation by the RBNZ Board.
Minister of Finance Grant Robertson said stability and continuity were important considering global conditions, which included high inflation, and defended the decision to reporters this morning.
“We do need continuity and stability at this time,” he said. “New Zealand’s overall performance when it comes to the issues that the bank is responsible for does compare well with the rest of the world. I’m happy to have reapppointed him.”
However, National’s finance spokesperson Nicola Willis had written to Robertson at the end of September, saying the party did not support Orr’s reappointment for a five-year term and repeating calls for the central bank’s performance to be reviewed independently.
Willis told reporters this morning her concerns about the independence of a review by RBNZ still held.
“They hand picked those experts. It’s a bit like saying to someone, ‘look, you mark your own homework, and then pick your favourite teacher to tell you whether or not you’ve done a good job’. And we think we think a more robust approach as necessary,” she said.
“There’s been extraordinary decision making in the past couple of years. The Reserve Bank printed tens of billions of dollars, had a lending program that made money virtually free for the commercial banks, and all we’re saying is – don’t you should think you should take a look at whether the right decisions have been made here?
“When New Zealanders are suffering from a cost of living crisis, they expect some accountability. We think the government should answer questions about whether the Reserve Bank got its decision making right.”
In her letter, Willis had also highlighted the six-month appointment of an acting governor by the previous National government leading up to the 2017 election, “taken out of respect for the bipartisan consensus that underpins New Zealand’s monetary framework”.
National’s leader Christopher Luxon doubled down on that when asked about Orr.
“Nicola expressed that I thought incredibly well in her letter to Grant Robertson, saying ‘Hey, listen, we think it’s appropriate that you follow convention, which would be appoint him for a year so we can get through the election period of time”.
However, Robertson this afternoon said the Reserve Bank Act was very prescriptive about the appointments process.
“It is carried out by the board and then a recommendation is made to me. There’s the standard convention about [not appointing permanently to the role] three months before an election – we’re obviously well outside that period.”
He also said he was not relying solely on the Reserve Bank’s own report on its performance.
“It’s only an aspect of my consideration. My consideration is that the Reserve Bank Board made a unanimous recommendation to appoint Mr Orr, New Zealand’s performance in recent years I think compares well with the rest of the world. This has been a time of significant disruption and I think continuity and stability is important and for all of those reasons I was happy to accept the board’s recommendation.”
He said he had confidence in Orr, and he believed it would be politicising the role to go against the RBNZ Board’s recommendation to reappoint him.
Willis rejected questions about whether the political independence of the Reserve Bank was being put at risk by the party’s criticisms.
“It is not sufficient for the bank to mark its own homework and handpick people to say they’ve done a good job. We think questions should be asked and answered. This is about accountability for a situation that is very difficult for many New Zealanders today.”
“If I was finance minister, I would immediately inquire into the impact monetary policy decision making has had, how much has that money printing added to the bottom line for banks How much have they benefited from really cheap lending and how much of that is being passed on.”
National has avoided criticising Orr without the independent review into RBNZ’s performance it was calling for.
ACT leader David Seymour, however, outright opposed Orr’s reappointment, saying he had overseen a term of “poor leadership, poor focus and poor outcomes”.
In an earlier statement, he said one of Orr’s defining features was a failure to accept responsibility.
“When appearing in front of the Finance and Expenditure Committee last week he refused to accept the Reserve Bank has gotten anything wrong, despite massively overstimulating the economy, causing consumer price inflation, asset price inflation, inequality, and now higher interest rates.”
Willis repeats call for review to consider impacts on commercial banks
Willis also pointed to the comments made by Prime Minister Jacinda Ardern yesterday about the high profits being made by commercial banks, again saying an independent review of monetary policy could look at that too.
“The independent review should explicitly look at how these decisions added to profits for the commercial banks and whether or not that was passed on to New Zealanders. If the people who benefited from this money printing are simply the shareholders and the commercial banks, then New Zealanders deserve to know that.”
“Healthy, profitable, banks are good if New Zealanders are being charged fair fees and if they can be confident that they are not paying too much interest on their loans.”
Robertson said the government was not considering a review of bank profits through the Commerce Commission, as that work could be outside its mandate, but the government was looking at how it could handle the matter.
“If we were to go into that we would need to make sure that it was in the mandate of the Commerce Commission,” he said.
“The government’s job is to set a regulatory framework that ensures we have both a competitive and a stable banking sector, we continue to look for ways to improve that.”
Ardern said Orr himself had raised the issue of banks’ profitability and the extents of their social licence.
“So I don’t think anything we’re saying here is vastly different to what we’re even hearing the Reserve Bank saying at this time.”
Luxon however said it was not good enough for Ardern to be raising the matter but do nothing about it.
“The prime minister can’t just talk about it. She could do something about it, which is do that review, understand whether her actions and those of the Reserve Bank actually created the situation where the banks can make large profits.
“The government is not taking accountability or responsibility for its actions that has created the environment where banks have been able to make large profits and that’s why we say we need an independent review.
“We wanted that review before the appointment of Adrian Orr because we actually think there was monetary policy decisions, government spending decisions that have contributed to an environment where there has been massive asset price inflation, and banks have made large profits.”
He said the party had been quite shocked with Orr’s appointment, but did not commit to replacing Orr as governor if they won the election next year.
“Our position’s really clear, from day one we want to kick off an independent review of monetary policy action under this Reserve Bank Governor that would then determine whether we do or don’t have confidence in him going forward.”
Story Credit: rnz.co.nz