In his student days, Adrian Orr once tried to clear a University of Waikato campus lake Evel Knievel-style. He failed, but went on to become Reserve Bank Governor.
Photo / Getty Images
In his student days, Adrian Orr once tried to clear a University of Waikato campus lake Evel Knievel-style. He failed, but went on to become Reserve Bank Governor.
Photo / Getty Images
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
Orr’s tenure saw criticism for over-stimulus during the pandemic, leading to high inflation and recession.
Orr’s approach included tackling climate change and cultural issues, but support has waned with the new Government.
“Sorry to be boring,” said former US Federal Reserve Chairman Ben Bernanke at the Reserve Bank’s big conference last week, before diving deep into a technical answer to a question from the floor.
Bernanke’s apology was unnecessary for two reasons.
Firstly, his speech wasn’t boring... to those of us whocare about monetary policy at least.
Secondly, unlike politicians, central bankers get a lot of license to be boring.
Those who were there during his student days at the University of Waikato recall he was something of a party legend.
He tried to jump one of the lakes on the campus, Evel Knievel style, on his motorbike, in front of a crowd that included at least one future Herald journalist and one future bank economist.
He didn’t clear the lake. But he made a huge splash.
That story might work as a metaphor for his time as central bank Governor.
Except of course, like everything to do with monetary policy, there’s a bit more nuance than that.
Introducing Bernanke at the conference, new acting Governor Christian Hawkesby alluded to Orr’s departure and suggested that – with inflation back in the target band, the economy in recovery – that Orr was departing on a high.
As Reserve Bank Governor, Adrian Orr was many things, but boring wasn't one of them. Photo / Mark Mitchell
In some respects, Orr may have just cleared the metaphorical lake before riding off into the sunset.
But in the watching crowd are many critics who argue that the landing, such as it has been, has come at too high a cost.
With hindsight, it is now widely accepted that governments and central banks overcooked the stimulus during the pandemic.
Inflation that was supposed to be transitory stuck around too long and required a brutal policy response that – in New Zealand at least – resulted in a tough recession.
Many of Orr’s critics can quite rightly say that their concerns aren’t hindsight.
The likes of former Reserve Bank staffers Arthur Grimes and Michael Reddell, and University of Auckland professor of economics Robert MacCulloch, raised these concerns at the time.
For the record, Bernanke was diplomatic in his reading of New Zealand’s economic response to the pandemic last week.
He argues that during the pandemic “energy and food prices, reflecting commodity prices determined in global markets, drove much of the inflation, both in the US and globally”.
“New Zealand appears to have had an inflation experience that, in broad strokes, was similar to the US and other countries,” he said.
That is a fairly heavyweight rejection of the most simplified political attacks Orr faced during his tenure.
But Bernanke does go on to suggest “that fiscal expansion in New Zealand was greater, relative to GDP than in most other countries” and that “could help explain the higher cost of disinflation here, as measured in terms of job losses”.
That’s the diplomatic bit, because you have to look at the RBNZ’s decision-making around quantitative easing in tandem with fiscal decisions made by the Labour Government.
Robert MacCulloch makes the point that New Zealand was different to other nations precisely because of its success in keeping Covid-19 out.
Through much of 2020 and 2021 the economy functioned pretty well with booming domestic tourism and the influx of newly returned Kiwis going a long way to offset the closed international borders.
Was QE even necessary?
The RBNZ erred on the side of caution and if things had gone differently it might have been the right call.
But even allowing a degree of leeway for policy missteps during an unprecedented pandemic, many of Orr’s critics have expressed disappointment at the failure of the Governor to acknowledge that things might have been done differently.
In a recent blog post, Reddell – perhaps Orr’s fiercest critic – tacitly acknowledges the former Governor’s impressive strength of character, suggesting he may have been a better politician than central banker.
But based on Reddell’s opinion of most politicians – it was probably not a compliment.
If so it was a flashpoint over an issue which – to most of the public – is as dry and boring as unbuttered toast.
It’s almost forgotten in the mists of pre-pandemic times but this was once a much bigger source of conflict for the RBNZ than monetary policy settings.
I got on well with Orr. He is a smart, funny and passionate man. And he can get very animated about things when he is passionate.
He can be combative.
He famously wrote a paper describing the Reserve Bank as Tāne Mahuta, the ancient kauri tree considered sacred for Northland iwi.
It was just a metaphor but was perceived as much more than that by his critics.
And perhaps it was.
Orr was trying to reshape the role of the central bank in society.
He and his staff actively tackled issues like climate change and cultural inclusion.
Support for this approach has waned with the new Government, which is looking to cut costs and strip the RBNZ back to core functions.
Regardless of their merits, I think the cultural battles muddied the debate about what monetary policy should have been doing during the pandemic.
They entrenched positions at a time when more consensus-building was needed.
It seems we’re now headed back to an era of more traditional central banking in New Zealand.
Like Grant Robertson, the Finance Minister that appointed (and reappointed) him, he leaves in a political climate unsuited to his style.
There’s no doubt the years of intense public scrutiny will have taken a toll.
Economic historians will have a lot to say about Orr’s tenure in time.
But they won’t accuse him of being boring.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.
