The Reserve Bank (RBNZ) will pay its first dividend to the Crown in three years following Minister of Finance Nicola Willis agreeing the RBNZ should pay a $597 million dividend this year.
The central bank last paid the Government a dividend in 2021 which came to $140 million.
The RBNZ revealed the dividend plans in its 2024 annual report, which was released on Tuesday.
The bank said $597 million of equity had been available for distribution by the end of June 2024 in accordance with the bank’s dividend principles, and Willis agreed with the RBNZ’s $597 million recommendation.
The RBNZ said in its annual report for this year’s dividend assessment it recommended a minimum Target Capital Level (TCL) of $4.1 billion, which is broadly in line with the prior year.
The TCL is the RBNZ’s minimum level of capital it considers enough to cover potential financial risks. The TCL gets reviewed and approved annually by the RBNZ’s board. The Minister of Finance reviews the central bank’s assessment of the TCL when determining its annual dividend recommendation.
“For the year ended 30 June 2024, the Reserve Bank recommended to the Minister of Finance a Target Capital Level (TCL) of $4.1 billion for the purpose of the 2023/24 financial year dividend recommendation,” the RBNZ said.
RBNZ Governor Adrian Orr said in the report the central bank continued to operate in a “challenging external environment” domestically and internationally.
“The increasing-interest-rate environment exposed some fragilities in the global financial system, particularly where risks had been inadequately managed,” he said.
Orr said the bank’s “restrictive” monetary policy had helped to reduce capacity pressures in the New Zealand economy and lower consumer price inflation.
Pay cut for Orr
Orr’s remuneration for the 2024 financial year came to $804,802 which is a pay cut of almost 6%, or $49,000, from the $853,810 he received in 2023. Orr's remuneration includes base salary, KiwiSaver employer contributions, and other employee benefits.
A Reserve Bank spokesperson revealed the reason for Orr’s pay cut to Interest.co.nz on Tuesday afternoon.
“The key reason for the difference to last year’s remuneration is that the Governor’s annual leave balance reduced, and therefore, has reduced his total remuneration during the year,” they said.
The RBNZ board remuneration went in the other direction and was up 9.5%, or $63,000, compared to the 2023 financial year.
RBNZ Chairman Neil Quigley received $197,496 in remuneration during the June-2024 year, an increase of 16%, or $27,369, from the $170,127 last year. Quigley is also the vice-chancellor of the University of Waikato.
In his address in the report, Quigley said the RBNZ had continued to “work productively” with the Treasury which monitors the central bank.
The RBNZ reported a surplus of $375 million in the June-2024 financial period, which is a $173 million increase from the $202 million surplus it reported last year.
One of the main contributors to this surplus was net interest income rising by $53 million to $394 million compared to 2023 – driven by a higher Official Cash Rate (OCR), the RBNZ said.
Net gains from fair value changes of $154 million and a loss of $21 million from foreign exchange rate changes also featured.
Staff numbers & costs rise
The RBNZ’s annual report shows the number of full-time staff at the central bank rose by 91 employees, or 17.8%, in the June-2024 year.
Annual staff expenses rose to $94 million, up from $80 million last year.
Total operating revenue rose 54.2%, or $196 million, to $557 million. Total operating expenses were $23 million higher than in 2023, coming to $182 million in the June-2024 year.
However, while expenses were higher this year compared to 2023, they were still $30 million lower than the board-approved budget.
The RBNZ said banknotes and coins in circulation dipped to $8.9 billion in the 2024 financial year, down from $8.92 billion last year.
Orr said the resilience of NZ’s cash system remains a “key concern” for the RBNZ, and an area of policy and operational focus.
Meanwhile, the RBNZ says it continues to manage its operating expenses in line with its current five-year funding agreement with the Government, which runs until 30 June 2025, and says it "retains sufficient optionality to remain within the five-year funding agreement."
12 Comments
Orr’s remuneration for the 2024 financial year came to $804,802 which is a pay cut of almost 6%, or $49,000, from the $853,810 he received in 2023. Orr's remuneration includes base salary, KiwiSaver employer contributions, and other employee benefits.
Why is Lord Orr's salary 1.4x higher that of Jerome Powell's and 1.2x higher than that of Kazuo Ueda? Surely can't be performance. Experience? Qualifications perhaps? Ueda holds a Bachelor of Science in Mathematics and a Ph.D. in Economics from MIT. Orr has Bachelor of Social Sciences in Economics and Geography at the University of Waikato and earned a master's degree in Development Economics with distinction from the University of Leicester (never heard of UoL).
The world's highest-paid central banker is Thomas Jordan, President of the Swiss National Bank - approx USD1.1 million.
Christine Lagarde, President of the European Central Bank, earns approx USD460,000, which is less than Orr's total package.
Mind you, Lagarde is more crooked than a shattered dog's leg. No doubt she'll be making out like a bandit in some unreported way.
What about the losses on covid loans? The RBA has incurred them, and they only operated their funding programme for half the time the RBNZ did. I find it difficult to believe that the RBA is taking losses while the RBNZ is not.
The Reserve Bank of Australia board has conceded that the $188 billion in cheap credit it extended to banks during the pandemic may have been excessive and not enough work was done to forecast the significant financial losses the central bank incurred.
At least $43 billion in pandemic-era losses have forced the RBA to suspend paying multibillion-dollar annual dividends to the federal government and plunged the central bank’s balance sheet into negative equity, meaning the value of its liabilities exceeds assets.
https://www.afr.com/policy/economy/rba-concedes-188b-in-cheap-loans-may…
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