New Zealand's central bank loses its head as Adrian Orr suddenly resigns

By Wayne Cole and Renju Jose

The head of New Zealand's central bank resigned suddenly on Wednesday, ending a seven-year term that had become contentious at times after painfully high interest rates tipped the country into its worst downturn since 1991.

No reason was given for the surprise departure of Adrian Orr as governor of the Reserve Bank of New Zealand, whose term will now end three years early, on March 31.

"I leave the role with consumer price inflation at target, and an economy in a cyclical recovery following the long period of COVID-related disruption. The financial system remains sound," Orr said in a statement.

The current National Party-led government of Prime Minister Christopher Luxon was critical of Orr's stewardship while it was in opposition, blaming him for allowing inflation to soar after the pandemic and then for the high interest rates that led to recession.

Finance Minister Nicola Willis told reporters she had known for a few days that talks had been going on between Orr and the RBNZ board on him leaving, but offered no reason for the move.

Deputy Governor Christian Hawkesby will be the acting governor until March 31, when Willis - on the recommendation of the RBNZ board - will appoint a stand-in governor for up to six months as the central bank seeks a permanent replacement.

Orr will be on leave until he finishes in the role at the end of March.

"I’m stunned by the sudden resignation of the RBNZ Governor," said Brad Olsen, Principal Economist at Infometrics.

"There's more questions than answers...," he said.

"The fact that an Acting Governor is in place, despite the Governor remaining until 31 March, increases the current confusion and questions."

UNRELENTING CRITIQUE

The announcement comes just as the RBNZ is hosting an international conference of central bankers and academics to celebrate 35 years of its world-beating adoption of inflation targeting as a focus of monetary policy.

Reserve Bank Board Chair Neil Quigley said in a news conference later in the day that Orr will no longer be attending the conference.

"I think you have to remember that the job of the Reserve Bank governor is one where you face unrelenting critique of your actions," Quigley told reporters.

Orr was reappointed as the central bank governor for another five-year term in March 2023 before the National Party won power, a decision that drew some criticism from Luxon and Willis.

While Orr helped lead a massive stimulus programme to help the country deal with the economic damage caused by the pandemic, that in turn helped ignite a painful flare up in inflation.

The RBNZ reacted by raising interest rates aggressively from a record low of 0.25% to ultimately reach an eye-watering 5.50% and tipping the economy into recession last year.

This was New Zealand's worst economic downturn since 1991 outside of the pandemic, which analysts blame in part on low productivity and various policy missteps, in part caused by unreliable data.

At the bank's last monetary policy meeting on February 19, Orr had shown no inclination of leaving as he announced a half point cut in interest rates to 3.5%.

He also flagged further easings of a quarter point in April and May, which financial markets were still fully priced for. The local dollar also showed limited reaction, dipping only slightly to $0.5652.

Central bankers have faced intense scrutiny in the recent years over pandemic policies and rising living costs.

The head of neighbouring Australia's central bank suffered an early end to his 43-year career amid perceived missteps during the pandemic.