Reserve Bank of New Zealand Governor Adrian Orr has unexpectedly stepped down without providing an explanation for his sudden departure. Orr, who has three years remaining in his second five-year term, made this announcement in a brief statement on Wednesday in Wellington. Deputy Governor Christian Hawkesby will serve as Acting Governor until March 31, when Orr’s official departure will take place, according to an RBNZ spokesperson.
“I leave the role with consumer price inflation at target, and an economy in a cyclical recovery following the long period of COVID-related disruption. The financial system remains sound,” Orr stated.
Current government critical of Orr’s stewardship
The present National Party-led government, under Prime Minister Christopher Luxon, has been critical of Orr’s leadership while it was in opposition, attributing the soaring inflation post-pandemic to his policies, along with the high interest rates that have led the economy into recession. Finance Minister Nicola Willis informed reporters that she had been aware for a few days of discussions between Orr and the RBNZ board regarding his departure, but she did not disclose any reasons for the decision.
Deputy Governor Christian Hawkesby will serve as acting governor until March 31, at which point Willis—on the recommendation of the RBNZ board—will appoint an interim governor for up to six months as the central bank searches for a permanent replacement. Orr will remain on leave until he concludes his role at the end of March.
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Analysts express confusion over sudden resignation
“I’m stunned by the sudden resignation of the RBNZ Governor,” remarked Brad Olsen, principal Economist at Infometrics. “There’s more questions than answers…” he continued. “The fact that an Acting Governor is in place, despite the Governor remaining until 31 March, increases the current confusion and questions.”
The announcement coincides with the RBNZ hosting an international conference of central bankers and academics to commemorate 35 years of its groundbreaking adoption of inflation targeting as a key focus of monetary policy. Reserve Bank Board Chair Neil Quigley stated in a news conference later that day that Orr would no longer attend the conference. “I think you have to remember that the job of the Reserve Bank governor is one where you face unrelenting critique of your actions,” Quigley told reporters.
Orr’s controversial reappointment and its aftermath
Orr was reappointed as the central bank governor for another five-year term in March 2023, prior to the National Party assuming power, a decision that drew criticism from Luxon and Willis. Although Orr spearheaded a significant stimulus program to help the nation cope with the economic fallout from the pandemic, this initiative contributed to a painful surge in inflation.
In response, the RBNZ raised interest rates sharply from a record low of 0.25 percent to an extraordinary 5.50 percent, leading to a recession last year. This marked New Zealand’s worst economic downturn since 1991, excluding the pandemic, which analysts attribute partly to low productivity and various policy missteps, compounded by unreliable data.
A closer look at Adrian Orr’s leadership style
Orr, the son of a builder, took over the bank in March 2018 after a decade of leading New Zealand’s successful sovereign wealth fund. Colleagues have described him as a “colourful” and “larger-than-life” figure known for his pragmatism and candidness.
He quickly earned a reputation for surprising traders, keeping rates steady despite widespread expectations of a cut in February 2019, only to reverse course and indicate a cut the following month, despite robust economic data. A significant challenge arose during the COVID pandemic, when he lowered rates by 75 basis points to 0.25 percent in March 2020, initiated asset purchases, and launched a lending program for banks to stabilize the economy.
Orr, who has Maori ancestry, has placed Indigenous heritage and language at the forefront of the bank’s operations, contrasting with the current government’s intent to minimize the use of Maori language and concepts in official affairs.
Also, Orr advocated for a more consensus-driven approach to policymaking, with monetary policy statements now being released by a committee rather than solely by the governor. He has faced long-standing criticism from the ruling centre-right National Party, particularly from Willis, who became finance minister following the party’s victory in 2023. When Orr was reappointed for a second five-year term in November 2022 by the centre-left Labour Party, Willis, then serving as the opposition finance spokesperson, labeled the decision “a serious mistake,” calling for an independent inquiry into the bank’s monetary policy response during COVID.
