New Zealand’s next central bank governor learned at an early age how to run a business. Adrian Orr was 13 when his father died, leaving the family with a motel he’d been building in Taupo, a lake-side town in the middle of New Zealand’s North Island. Together with his mother and two older brothers, Orr ran the motel throughout his secondary schooling.The business and people skills he acquired as a teenager will come in handy when Orr, 55, takes the reins of the Reserve Bank on March 27. He needs to navigate the bank through the biggest reforms since it pioneered inflation targeting three decades ago, and rejuvenate an institution that’s become increasingly defensive after a number of communication blunders.
“The RBNZ has felt embattled in recent years,” said Christian Hawkesby, head of fixed income at Harbour Asset Management Ltd. in Wellington, who once worked with Orr at the central bank. “I’m sure Adrian will look to lift morale. That ability to relate to people and take them on the journey with you, that comes very naturally to him.”
Almost 30 years after the 1989 Reserve Bank Act led the world in giving the central bank an explicit inflation-fighting objective, the government says it wants to “modernize” the legislation. It plans to give the RBNZ a Fed-style dual mandate of full employment and price stability, and also wants to add external members to its policy-making committee.
The moves come after the RBNZ was criticized for raising interest rates prematurely in 2014 and for poor communication of its policy intentions under former governor Graeme Wheeler.
Wheeler curbed public speaking and media appearances, and drew flak for complaining to the chief executive of a local bank about an economist’s critical commentary. He was also forced to abandon a long-standing lockup for media and analysts after the leak of an interest-rate cut.
With inflation subdued and economic growth slowing, the bank is expected to hold its benchmark rate at a record-low 1.75 percent until 2019 — a message Acting Governor Grant Spencer is unlikely to deviate from in his final rate decision Thursday in Wellington.
Still, there’s some uncertainty about how Orr will conduct policy under a dual mandate. While the required law change won’t happen until later this year, the broader goal could be reflected in a new Policy Targets Agreement that Orr must sign with Finance Minister Grant Robertson before he takes office.
“A dual mandate will certainly throw up some communication issues,” said former RBNZ governor Don Brash, who hired Orr as chief economist at the bank in 1997. “I can’t think of anyone better at this point than Adrian to do the job. He understands the political realities, he understands economics, and he’s a good communicator.”
Of Cook Islands and Irish heritage, Orr grew up in provincial New Zealand and wasn’t shy of getting his hands dirty on his journey to becoming the country’s central banker.
He worked as a truck driver, plumber and sewerage pipe layer before degrees from Waikato University and then the University of Leicester in England set him up for a career in economics, he told E-Tangata magazine in a 2016 interview.
Orr worked in London and later in Paris, where he was an economist at the OECD, and held several roles in New Zealand before joining Brash at the RBNZ as head of the economics department. He was there when the central bank replaced its ill-fated Monetary Conditions Index with the official cash rate as its main policy tool in 1999.
After a stint as New Zealand chief economist at Westpac Banking Corp, Orr rejoined the RBNZ in 2003 and became deputy governor responsible for financial stability, a new role that combined financial markets and banking supervision.
His departure in 2007 to take the role of chief executive at the New Zealand Superannuation Fund was a surprise to those who tipped him as the next governor, but it allowed him to develop broader management skills and build his global reputation.
Under his oversight, the sovereign wealth fund, established in 2001 to help fund future pension payments, has grown to NZ$39 billion ($28 billion).
The government will hope that Orr can achieve similar success at the RBNZ as it transitions to a new era of committee-based decision making and, perhaps, a more growth-oriented monetary policy.
In a speech in November, Orr said the lessons he had learned in the past decade included being outward-looking, engaged in the world and willing to connect, learn and share.
“The other most important thing I have learned is the value of transparency, openness, accountability,” he said. “These standards are becoming the norm internationally, the essential navigation point for all businesses.”