The National Party's finance spokeswoman, Nicola Willis, pressed Orr on what the "medium term" looked like for inflation, given the bank is obliged to target "price stability over the medium term".
Inflation of 6.9 per cent is obviously well above what would constitute medium-term price stability - the question is, how soon can the Reserve Bank bring that figure back down? Orr's response was essentially that hiking interest rates any higher and faster risked triggering a recession.
"What we talk about [as] the medium term is the term we think our actions today will have the full impact on consumer price inflation - and generally that takes anywhere between 18 months and two-plus years," Orr said.
"Any earlier than that and a lot of our actions will not be highly effective - for example, if we immediately tried to get headline inflation of 6.9 down to somewhere between 1-3 then we would be creating severe volatility in output - in fact, we wouldn't achieve it," he said.
Orr said his "best foot forward" would be to get CPI inflation within two years.
Willis asked whether the Government should be helping the bank get inflation under control with "more targeted fiscal policy" - less government spending. National has been urging the Government to consider whether its level of spending is appropriate in the current, inflationary environment.
The bank's most recent Monetary Policy Statement, released in February, shows inflation returning to the band only by 2024.
Orr did not bite, and said what the bank needed was "fiscal policy as usual".
"The unusual part that we've come through," Orr said, citing pandemic-era wage subsidies, "that has passed - that was the unusual period. That macro, one-off support has gone, and we're back to the more targeted [approach]."
Orr clashed with Willis, saying the Government's fiscal impulse - which measures the amount of stimulus the Government is giving the economy relative to the year before - has gone negative.
"Fiscal policy - the Government's impulse was last year and the year before, is actually a drag now," Orr said.
"We are in for significant economic and financial challenges around which fiscal support is necessary to enable society to function as normal," he said.
Willis clashed with Orr over what constituted "normal".
"Wouldn't you expect the level of expenditure to not be as high going forward?" Willis said.
Orr said fiscal decisions were for the Government, and the quality of spending had an impact on how inflationary it might be. "It's not as simple as saying, 'if the Government spends a dollar then we have to raise interest rates'."
Orr said a lot of inflation was coming from overseas, which it could not control. Despite this, there was still too much domestic inflation.
"What do we need to do - what do we do with our instruments, where is the core underlying domestic-driven inflation? That is still too high but it is much lower than the 6.9 [per cent], it is about 3-4 per cent range," Orr said.
"We cannot lean against international oil prices."
The bank also waded into the long-running spat over what constituted a "sustainable" house price.
After the housing market caught fire in 2020, partly as a result of the Reserve Bank's money printing, Finance Minister Grant Robertson wrote to the bank, asking it to think about house prices when setting monetary policy.
Green MP Chloe Swarbrick has used nearly every appearance by the Reserve Bank at the committee since then to try to get Orr to set out explicitly just what constitutes a sustainable house price.
Under questioning from Labour's Duncan Webb, Orr buckled and said there was a "range", and said further detail would shortly be published.
Deputy governor Christian Hawkesby said current house prices were "in the order of 5 to 20 per cent away" from sustainable.
House prices would therefore need to fall 5 per cent to begin to enter the "range" of sustainability.
Swarbrick said the admission was "huge news".
Orr said he felt it was "not really news", but there would be more published on house prices in "the coming months".
