New Reserve Bank boss: 'Being a ginger, I tend to run towards the fire'

Friday, 20 April 2018

Adrian Orr speaks while Finance Minister Grant Robertson looks on, minutes after the pair signed the policy targets agreement which sets the outline for the central bank's approach to monetary policy.

Adrian Orr is not short of confidence, or an opinion.

Even as the new Reserve Bank governor acknowledges an awkward truth – the bank has been virtually reclusive in recent years – he is calling for staff to push back against critics who use it as a whipping boy.

Reserve Bank Governor Adrian Orr, in his office near the Beehive in central Wellington. In the same interview, Orr acknowledged significant problems with the Reserve Bank's communications while also pledging not to allow it to be blamed for things it was not responsible for.

'What I keep saying [to staff], is 'Stop owning things that you can't influence',' Orr said in an interview less than a month after taking the job, pointing to areas where it has been blamed because it let itself be.

'Three years ago the Reserve Bank was blamed for Auckland house prices. Really? What about the migration? What about the Resource Management Act?'

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The comments may be something of a warning for the new Government.

Will Orr, who quite literally looks down on the Beehive from his office, shy away from debating public policy in a way which could upset his political masters?

'Beware what you wish for,' Orr said.

Earlier in his career Orr was one of the architects of the Reserve Bank's then world-leading approach to inflation targeting.

But in the decade after the Reserve Bank was given the independence, the world learned that fiscal policy – government spending – had a major impact on inflation, even though people assumed it was the fault of the central bank.

'It was easy to blame the central bank for all the ills of the world,' until evidence pointed elsewhere, Orr said.

As Orr returns to the Reserve Bank, the focus is again shifting, with the central bank tasked both with inflation and maximising employment.

His response to the dual mandate was, 'Bring it on,' because of the insights it could give on the conventional wisdom around the New Zealand labour market.

'In five years time, we will have a really good understanding in New Zealand and dialogue about what does and doesn't work for the labour market and the country,' Orr said.

'It will shine a light around all of the difficult things around training, around tertiary education, the working age population, who choose to be in the labour force.'

Orr became the 13th governor of the Reserve Bank on March 27.

On the one hand, the job is arguably the most powerful position available to an unelected figure.

But on the other, Orr is surely the only public official in New Zealand who could be seen to be taking a step down.

His salary is likely to be a pay cut from his former job as chief executive of the New Zealand Superannuation Fund, which he headed for a decade.

During the global financial crisis, Orr pushed the fund to bet big on long term returns, a move which made it a stellar performer in the following decades.

Initially dubbed the 'Cullen Fund' for the role former finance minister Sir Michael Cullen played in its establishment, Orr began hearing chatter that it was becoming much too associated with him.

'I wanted to leave the fund because it was time to leave. I didn't want it to be Camp Adrian. People started talking about it that way. Adrian's Fund.'

The problem was finding something which suited his temperament.

'I am certainly attracted to wanting to make a difference.'

He is also attracted situations involving drama and excitement.

'Being a ginger, I tend to run towards the fire, rather than away from the fire. That's been to my cost my whole life.'

The cost is not obvious given his career record, but Orr blames that career on constant eczema, and to 'pass out moments' at home in the evening.

His temperament was not always up to the rigours of public life.

Early on, criticism of his approach led him to repeatedly assume the 'foetal position'.

He credits wife Sue Orr, a journalist and novelist, for getting through to him that it was all 'tomorrow's fish and chip paper'.

'It took a long time, a really long time, to get used to that. Now the only time I get myself upset is when my own personal integrity is challenged. The rest, I love people taking the mickey out of me.'

Orr claims that when he began considering the possibility of becoming governor, he struggled to get excited.

'But the more I learned about the challenge, the more excited I got and the longer I've been in the room, the more excited I've got.'

Much of the excitement appears to be around dragging the bank into the digital age, while grappling with the fact that notes and coins are still increasing faster than the economy is expanding, at a time when it appears almost no one uses physical currency to transact.

'We're still printing notes and coins faster than nominal GDP (is expanding), but I don't know who's using them,' Orr said.

'And what are the alternatives and what role should we play in those alternatives?'