It means that should National and Act win the next election, Orr will still have four years of his term to go. In reality, he's likely to resign if those parties take office. It would be impossible for him to serve under a government that clearly has no confidence in him - even if National won't explicitly say that yet.
That puts Orr and the wider economy in a very unusual position. For roughly a year leading up to polling day, the party most polls favour to win the election won't commit to keeping him on.
National says that even if it won the election it wouldn't sack Orr, it would wait for the results of an inquiry into the economic response to the pandemic before deciding whether or not it has confidence in him (in reality, Orr would probably resign soon after National took office). Act has gone further, saying it had "made it clear it has no confidence in Adrian Orr".
Orr's centrality to the inflation story is not in question - what is in doubt is whether he is the hero or villain of the inflation battle.
The Government is uninterested in asking that question via an inquiry mainly because it is afraid of what the answer might be. National and Act (and the Greens, for that matter) want an inquiry into the economic response to Covid-19. The Government has, for more than a year, been denying this request.
The results of that inquiry will probably be mixed, contrasting the relative economic security most New Zealanders witnessed during the pandemic with their jobs and incomes safe, with the utter chaos of the housing market over the last two years and the inflationary picture of the last 12 months (inflation, remember, has been high since before the Ukraine conflict - annual CPI inflation was 5.9 per cent in December 2021).
It's possible that any inquiry would have stern words for just how much the economic response to Covid was overcooked. Stern words not just for Orr, but for Robertson too.
It isn't supposed to be like this. Orr, or indeed any central bank governor, is not meant to be in his position.
Central Banks are meant to be boring. They soberly fight inflation, letting politicians get on with politics. The five-year term of the Governor is set so that it bestrides the three-year election cycle.
The appointment of the Governor is done in consultation with other political parties to try to achieve political consensus and find a candidate everyone could live with.
But the return of inflation has shattered that apolitical consensus. Far from being apolitical, Orr's future looks set to be decided by whether National or Labour wins the next election.
By the rules of the last three decades, this dispute has put the economy in a terribly awkward and uncertain position. Economies crave certainty. That's why the guide rails around the appointment and direction of the Governor exist. In these uncertain times it does no good to have a question mark hanging over the Reserve Bank Governor for a year or more.
This is why National won't go so far as to say it has no confidence in Orr. It would look borderline irresponsible for a major party to declare a loss of confidence in Orr and run the risk of unleashing market turbulence so National has had to content itself with a position in the political twilight zone. It's probably made the right call here. The party's view is clearly telegraphed - but in a way unlikely to provoke market distress.
There's an air of inevitability to the politicisation of the Governor to this that stretches beyond the simple question of whether Orr has done a good job or not.
If Inflation is economic cancer and the bank's means of fighting it - lifting interest rates - is chemotherapy.
It makes the patient sick in order to make them well, starving the economy of easy money in a bid to kill off excess demand.
For all the critics on the right outraged that the bank is doing an inadequate job of cleaning up its own inflationary mess, there are critics on the left concerned the Bank's titanic interest rate hikes will tip the economy into recession, unleashing a wave of unnecessary unemployment at society's most vulnerable.
The choices the bank makes to fight inflation (and, on the contrary, to fight pandemic-era deflation) are the very essence of political and it is perhaps naive to indulge the fantasy of the last three decades in thinking they are not.
Tens of thousands of people could lose their jobs as the bank hikes interest rates to cool CPI inflation. This is a political decision. It pits one group of people - those who are likely to be laid off, against another - those who won't be.
The depoliticisation of central banking has served its purpose over the past three decades of keeping inflation low and stable.
Should they wish to maintain their defence of that system, our politicians might wish to consider the ways they mollify the side effects of the Reserve Bank’s actions, primarily New Zealand’s unstable housing market and the looming unemployment shock.
