Graeme Wheeler next RBNZ Governor

Finance Minister English appoints former World Bank vice-president Graeme Wheeler as next Reserve Bank Governor, replacing outgoing Bollard

26th Jun 12, 11:17am by Alex Tarrant

Former World Bank managing director and vice-president Graeme Wheeler will be the next Governor of the Reserve Bank of New Zealand after current Governor Alan Bollard steps down in September.

Finance Minister Bill English made the announcement on Tuesday morning. Wheeler will take up the position when Bollard's second five-year term ends on September 25.

Wheeler would be governor-designate until a new policy targets agreement between the Finance Minister and Governor was finalised in the next few months, which was required before a new governor was appointed.

English said he did not envisage any major changes to the policy targets agreement, which currently requires Bollard to keep headline medium-term inflation within a 1-3% target band.

Current Reserve Bank Deputy Governor Grant Spencer was considered by financial market participants as the other major contender for the role.

Kiwi who rose to top of World Bank

“Mr Wheeler’s extensive experience makes him a highly respected figure in world financial markets and within New Zealand," English said.

"We were fortunate to have someone of his calibre available for this important role," he said.

From 1997 to 2010, Wheeler, a New Zealander, was employed by the World Bank. His most recent roles there included managing director operations (2006-2010), and vice-president and treasurer (2001-2006). Previously, he was at the New Zealand Treasury as deputy secretary and treasurer of the Debt Management Office.

Wheeler currently lives in the United States and runs his own advisory business.

In 2007 he was considered to be one of the leading contenders for the position of World Bank president after the resignation of Paul Wolfowitz. However, the role went to American Robert Zoellick, keeping with the tradition of having an American head the organisation.

As required under the Reserve Bank Act 1989, the Reserve Bank board of directors recommended Wheeler’s appointment to English, after an extensive recruitment process domestically and internationally, the Finance Minister's office said in a press statement.

“Given his experience and standing, combined with his technical and leadership qualities, the board considered that he has all the qualities required to become governor and chief executive of the Reserve Bank,” English said.

Current PTA working

English said he did not envisage any major changes to the policy targets agreement.

“I consider that the current PTA has served New Zealand well and there are benefits in maintaining consistency in the PTA," English said.

“However, the global financial crisis has focused some attention on monetary policy frameworks, and I want to ensure that the PTA continues to reflect best international practice," he said.

English also paid tribute to Bollard for his leadership at the Reserve Bank over the past 10 years.

“He helped steer the New Zealand financial system through the biggest global crisis in several generations. At the same time, he ensured that this country continued to enjoy one of the most stable inflation environments in the world," English said.

Reactions

Westpac economists

This morning the Finance Minister Bill English announced that he has appointed Graeme Wheeler as the next Governor of the Reserve Bank, for a five-year term to begin when Dr Alan Bollard steps down on 25 September.

Mr Wheeler has worked at the NZ Treasury as Deputy Secretary and Treasurer of the Debt Management Office. From there he worked at the World Bank as director of its financial services department (1997-2001), vice-president and treasurer (2001-2006), and managing director (2006-2010), that organisation's most senior staff role. In this position, he gained prominence for his role in the resignation of World Bank President Paul Wolfowitz after revelations of conflicts of interest.

Selecting an outsider is a notable move. Both of the previous Governors (Dr Brash and Dr Bollard) were surprise choices, and both were brought in with a mandate for changes in how the RBNZ operates. And like Dr Bollard, Mr Wheeler does not have central banking experience, so it would appear that leadership qualities were a key consideration.

We don't have any indication of how Mr Wheeler's approach to monetary policy will differ from Dr Bollard's, so the Policy Targets Agreement (PTA) that he will need to negotiate and sign with the Finance Minister by September will offer some crucial clues. The Finance Minister has said that he doesn't envision any major changes to the current PTA; however, he added that "the global financial crisis has focused some attention on monetary policy frameworks, and I want to ensure that the PTA continues to reflect best international practice."

However, the scope for change within the RBNZ extends well beyond this negotiation. The PTA is an agreement on the definition of "price stability", and how to gauge success or failure in reaching that target. More complex changes, such as shifting from a single decision-maker to a committee for monetary policy decisions, or widening the RBNZ's goals beyond price stability, would require legislative changes. It is possible that Mr Wheeler was chosen as someone who could shepherd through any such changes over the next few years.

One change that we can predict is that, as the next tightening cycle begins, the new Governor will find himself with a range of 'macro-prudential' tools that the RBNZ has been developing over the last few years. (Note that these also fall outside the scope of the PTA, which defines the ends rather than the means of achieving price stability.) The next five years are likely to be an exercise in operationalising these tools, educating the market and the public in how they work, and studying their effects.

We will provide further thoughts in a Bulletin today.

Green Party

The appointment of Graeme Wheeler as the new Governor of the Reserve Bank is an opportunity for the Government to adopt a modern monetary policy, Green Party Co-leader Russel Norman said today.

"The Reserve Bank's one-tool toolkit is plainly inadequate for the economic reality we live in", said Dr Norman.

"Currently, the Reserve Bank faces a dilemma. If it cuts interest rates, it risks another housing bubble. Instead, it has done nothing, which causes a high exchange rate, hurting exporters and domestic producers.

“The negotiation of a new Policy Targets Agreement between Mr Wheeler and the Finance Minister is an opportunity to give the Reserve Bank a broader mandate and a wider range of tools.

"The Greens have outlined a range of possible tools the Reserve Bank could use, such as loan to value ratios. A debate on which tools are best suited for New Zealand's needs is urgently required.

“The appointment of a new Reserve Bank Governor is the time for that debate," said Dr Norman.

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47 Comments

by Basel Brush III | 26th Jun 12, 11:56am 1340668576

English said he did not envisage any major changes to the policy targets agreement.

“I consider that the current PTA has served New Zealand well and there are benefits in maintaining consistency in the PTA," English said.

“However, the global financial crisis has focused some attention on monetary policy frameworks, and I want to ensure that the PTA continues to reflect best international practice," he said.

So the new Governor is hog tied before he starts?

by Plan B | 26th Jun 12, 2:10pm 1340676654

English is a well know 'clever idiot' He is so clever he simply has no idea how wrong he is on some many issues.

Don Brash was another 'clever idiot' look what a mess he made of things. As Govener of the Reserve Bank and architect of the framework for all current RB policy. He single handedly created the mess we have as a country owing so much for stuff we already owned- our housing stock. What a complete mess. And to this day he has no clues at all as to how wrong he is.

by steven | 26th Jun 12, 4:24pm 1340684657

of course not, he's probably just appointed a new yes man.

Like I said it comes back to the Pollies....vote in the blinkered they appoint the blinkered. Though actually Dr Bollard is a huge improvement over Brash....quite good actually IMHO, thank god he was.

regards

by raf | 26th Jun 12, 12:05pm 1340669139

"and I want to ensure that the PTA continues to reflect best international practice"

And that best international practice is?

a) Creating massive credit bubbles.

b) Increasing inequality through austerity programmes.

c) Bailing out banks with taxpayer funds.

d) Creating an enormous current account deficit.

e) All of the above

f) Something we've all missed.

by powerdownkiwi | 26th Jun 12, 12:12pm 1340669561

you only appoint a qualified stable-door-shutter

if you're too stupid to realise the horse has bolted.

by Stephen L | 26th Jun 12, 12:21pm 1340670115

Given the wide debunking of an inflation only target around the world, and it's clear culpability in our disastrous current account situation, it's hard to disagree with anything Russell Norman said. It is time for a debate, using first principles of how different tools work, and looking at examples of our peers overseas and how they have used varying tools, and the results they have achieved.

At first look, it is good the choice as new Governor is not an inside RB man, given serious doubts about the current model. He would seem to have enough gravitas to make changes.

The catch is whether Bill English and John Key are open to such a debate- they usually do not give the impression that they do want a debate that can't be covered in 2 minutes on the Breakfast show.

by Plan B | 26th Jun 12, 2:13pm 1340676826

Agree with all that except this little bit.

the choice as new Governor is not an inside RB man

To me he looks like an ultimate insider - a former World Bank VP no less.

Therefore It is very doubtful that he can see any of the problems that we have with our fake independent Reserve Bank- Independent of us the people that is- not independent of the Banks.

by Stephen L | 26th Jun 12, 3:06pm 1340680011

Fair comment. Hopefully we will both be wrong, and he will prove capable of change, and to see past a paradigm that is built for global bankers.

by Nic the NZer | 26th Jun 12, 7:31pm 1340695887

I don't think you quite understood the meaning of independent. It would be in fact very surprising if he was independent of the banks operating in NZ. The only people he is expected to be independent of is whoever is in parliament.

The RB's job is to maintain stability of the banks operating in NZ, you can hardly expect more than that.

by powerdownkiwi | 26th Jun 12, 1:49pm 1340675342

http://rt.com/business/news/max-keiser-slams-banks-downgrade-by-moodys-512/

Shallow - so they might get it. That's the horse. What we really need is a Herman Daly.

Unlikely, given the narrowness and the ideology of the current lot. Notice how they look like they've seen a ghost recently? Punch-drunk and on the ropes, is how they look. Pity there are no alternatives: Norman is a clever boxer but he's not in the right ring yet. I suspect he knows where it is, though - puts him ahead of the rest.

The World Bank was just a channel for folk who owned resources to be stripped of them, while paying for the 'privilege'. You need a dam, so our cronies can smelt whatever. You will have 'jobs', but a repressive regime - funded by our cronies - will ensure the wages are akin to those paid off the New Zealand coast (slave). You will 'pay' for the dam, and the 'interest' on the 'loan' will go back into the pockets of our cronies.

That rort stopped being sustainable when peak energy stopped underwriting the fiat lever. My betting is that this fellow understands that less than Bollard.

by Boatman | 26th Jun 12, 1:53pm 1340675625

Thank God those clueless bastards in the Green Party don't run New Zealand. They want to try to control everything , down to Loan to Value Ratios, in other words limiting what people can borrow.

There is not one sensible or realsitic idea in their comment . They should stick to hugging trees and feeding bunnies and leave the economy to be run by people who want to get us out of recession and growing again

You want to destroy a modern economy ... just go ahead and do this sort of thing . Its Nanny State communist thinking of the worst possible kind .

Restricting borrowing should be a very last resort only in boom times when the economy is over-heating , and not when we are in the middle of a recession when no one is spending

Furthermore, Governments simply cannot and should not try to control every aspect of peoples lives.

by Plan B | 26th Jun 12, 2:03pm 1340676208

restricting loan to value ratios is actually more about restricting predatory foreign banks than it is restricting us. To understand NZ you have to think of yourself more as 'a cow being milked by foreign banks' rather than as an independent agent.

Your problem is in a nanny state telling you what to do, A state that you can vote for, can influence. However you seem to have no problem being told what to do by a cartel of foreign banks. Interesting.

by heathcliff | 26th Jun 12, 3:55pm 1340682912

Perhaps you would care to explain who these predatory foreign bank are, and while you're about it, how we are 'a cow milked by foreign banks'. Like so many other clueless commenters, you also wouldn't have a clue.

by powerdownkiwi | 26th Jun 12, 4:15pm 1340684101

I can answer that: banks don't 'do' anything. They expect to charge for the service, though, and to spend their profit on things that have been 'done'.

In other words, like many activities, they are parasitic on real stuff happening. If they're offshore, then they're parasitic onreal stuff happening here.

Why is it that so many folk thing 'money' can be 'made' trading nothing (selling the same house at ever increasing 'prices', for instance, which the banks happily profit from) then expect that virtual scrip to but real goods/services?

Clueless? Who is?

by heathcliff | 26th Jun 12, 4:38pm 1340685533

So the banks don't do anything. Right, now I get it. NOT.

If you are talking about the Australasian banks present here, with their capital and staff and shareholders, I think you'll find they do do stuff, and in fact through their forbears have been doing stuff since 1840. Like providing finance, taking risk, providing services, paying tax and raising capital (without resorting to the poor ole taxpayer) and all those things which are needed for a civilised society.

Parasitic? Crap. Where do you think the capital comes from? It's resonable the banks should be rewarded for the risk and capital employed. If they weren't represented here, we would have to do all this ourselves by borrowing the capital and taking the risk ourselves. No thanks.

The banks are responding to demand, and if you don't like that, perhaps look at changing tax settings or other legislation to dampen demand, but don't blame the banks. Oh and the profits on increasing asset values accrue to the owners, not the lenders.

This left-wing concept of controlling people's lives to the nth degree is not the answer.

by powerdownkiwi | 26th Jun 12, 4:59pm 1340686741

HAHAHAHAH...A.

Any physical (therefore real) activity, can happen without banks, money, usury, just by doing it.

Sure, in the growth phase (when you start from scratch, there's always a growth phase - it can't be any other way) there is room for growth-based systems, including interest and profit.

The problem is that when the Gaussian tops-out (oh dear, didn't they tell you about that?) then the growth-based stuff has to become obsolete, and unmaintainable.

Then as you start down the right hand side......

http://physics.ucsd.edu/do-the-math/2011/09/discovering-limits-to-growth/

You obviously have a vested interest in banking - but history is littered with folk who had vested interest in things which couldn't be sustained. Flax-milling in NZ, for example. Don't let that skew your thinking - and accusing someone like me (who thinks the planet can/will support 1-2 billion people, and will get there within 50 years) of being 'left wing', suggests you're applying skew.

by scarfie | 26th Jun 12, 10:54pm 1340708054

Please clarify, are you saying that banks are the source of capital? Or create it?

by midgetkiwi | 27th Jun 12, 12:11pm 1340755919

wow, are you serious? I'm relatively financially illiterate, but these comments even seem obviously wrong...

"Like providing finance, taking risk," you mean the risk associated with typing numbers into a keyboard to create currency? Risk of carpal tunnel syndrome? Risk of... being bailed out by taxpayers for bad lending practices which lead to massive profits in good times and massive profits in bad times, albeit with long speeches to calm the sheep?

"Oh and the profits on increasing asset values accrue to the owners, not the lenders." I thought this was obvious too.. increased asset values accrue to owners and lenders (bigger mortgages = more interest earned over time, = profit?) and real estate agents and anyone else that earnes percentage-based comissions/profits from any asset.

If i'm mistaken Mr Heathcliff banker dude, please correct me, I'm always up for learning from mistakes.

by Stephen Hulme | 27th Jun 12, 2:10pm 1340763055

@heathcliff

If they weren't represented here, we would have to do all this ourselves by borrowing the capital and taking the risk ourselves. No thanks.

I'd do it - it's like stealing candy from a baby - money for nothing - authorities indifferent. That's why it's so hard to get in. Ever tried?

by Plan B | 27th Jun 12, 1:48pm 1340761733

New Zealand is currently occupied by the ofur most profitable banks in the world. Now this may not be as good as it possibly sounds. Predatory Banking cartels like the ones operating in NZ are a risk to the host when they continue to take more and more of the wealth of New Zealand. The obvious way was through massive asset price rises. The timing is pretty good really, we get an 'independent' reserve bank and they get massive asset price rises which mean higher and higher debt. Remember banks do not make anything. They are in a very privillaged position they need to be heavily regulated - probably one of the most important things the state should do. They are in many ways in control of our money supply. Everyone seemed to think that the massive increase in our money supply over the past few years would be alright because it was locked into property and would not leak out into the real economy, but it did. Prices in NZ for NZ stuff doubled in a short time lagging slightly behind the doubling in house prices. What a mess. On the matter you raised regarding clues I actually do think I have a clue, at least one anyway.

by steven | 26th Jun 12, 4:17pm 1340684272

Control LVR's like texas does you mean? you know they are a bunch of lefties there right?.....right?

Funny thing but it seems to work, and the theory is sound on why...it controls leverage...maybe you have heard of that?

Growing, you cant grow infinitely on a finite planet.....

All I can say on your post is OMG, what rubbish from end to end.

regards

by Boatman | 26th Jun 12, 5:54pm 1340690069

Texas is more than slightly different . The LTVR system there only applies to residential property , is at 10% , has always been there through Boom and Bubble, meltdown and depression .

Texas is a huge economy, if it was an independent country would rank as one of the worlds biggest and Residential home lending is a tiny fraction of economic activity there ,

In short Texas is not New Zealand, and it would be dumb to even remotely compare them.

The fact is the Greens think that everything can be controlled by some central- planning-edict system as espoused by Marx and other loons , and they are wrong.

by powerdownkiwi | 26th Jun 12, 4:21pm 1340684486

Boatman - you sound like DavidB.

Borrowing is an expectation that the future will underwrite.

Not only is that theft from future generations, but given that it can be proven to be non-underwriteable, I suggest it's fraud. Ignorance was no excuse, last time I checked.

And Nanny State? This Govt has been responsible for quite a bit of rule-making, methinks, on behalf of those who would gain.

by Boatman | 26th Jun 12, 6:08pm 1340690904

PDK You are missing something here , or maybe I am . I dont see how home ownership (which the Greens want to control) is a burden on future generations.

Maybe you can enlighten me ?

Simply , the Greens want to restrict (to 80%) how much individuals can borrow to buy a roof over their head, because they beleive that 90% loans are causing a property bubble, which is utter nonsense.

Firstly Its not their decision how much people borrow , its up to the contracting parties , ie the Bank and the home buyer (how much they should lend or borrow)

Secondly the real culprit for our expensive property here, is restrictive land use legislation and Local authoirty fees.

This coupled with an open immigration policy means that demand exceeds supply , and the price goes up

The Greens are the same idiots who want the state to build and maintain 60,000 houses for unemployed people when the state cant even afford to pay teachers and policemen properly .

The Greens seem hell bent on establishing a marxist nanny state in which we will all be poor .

If it ever come to pass , I am off to Australia , because I am not wealthy enough to pay for this largesse

by powerdownkiwi | 26th Jun 12, 8:04pm 1340697871

Boatman - what a mixed rant, not sure I can 'enlighten' someone so cognitively dissonant, but here goes.

The Greens are currently what John A Lee was - socialist. Their remarks, then, may or may not be right by the yardstick of 'sustainability'.

Their restriction on what can be loaned, is right, if for the wrong reason. The right reason, is that the 'loan' (Soddy's negative pigs) expects to be paid back, and the interest charged expects to buy real stuff (positive pigs). We have passed the point, globally, where that can happen. Not enough planet, to put it bluntly.

Same with 'restrictive land-use' - we at the planetary limits, and by all measures (check out global aquifer depletion rates) we are 'there'. Build more houses, and you need more land to feed the occupants - a vicious circular regime which can only end one way.

We have hit the LTG - the Limits to Growth - with the existing housing stock, and there isn't the lead time to replace with more efficient. The triage approach has to be retrofitting the existing stock, until events overtake us. As they will. The Greens there are silly - just like trad Labour.

My better half hails from Towoomba - just visited and is happy to be back. Two-speed over there, and the big wave has to hit them too.

by midgetkiwi | 27th Jun 12, 12:18pm 1340756305

I can't stand the greens as much as apparently you can't boatman, still doesn't mean everything they advocate is "clueless". What is wrong with limiting LVR's when banks/finance institutions are the only private institution that never has to go bankrupt? (remember the crown retain guarantee? Do you think NZ citizens could have avoided going into more national debt because a few private businesses agreed to bad loans to make more money then be bailed out?)

by Plan B | 26th Jun 12, 2:52pm 1340679176

At least he is not from the UK Civil Service. Unlike several recent appointments.

by Chairman Moa | 26th Jun 12, 3:17pm 1340680669

Oh well, just another banker.. we have too many bankers running the country..

by heathcliff | 26th Jun 12, 3:48pm 1340682494

So what would you expect, Lawn Moa? WANTED; Reserve Bank Governor for struggling small country, must not be a banker, would suit live-in 'Married Couple', with the Missus to help with the housework and parties, and all that stuff.....

by Chairman Moa | 26th Jun 12, 4:06pm 1340683596

An economist ? may be an ex engineer - they seems to have (practical) solution for everything. Some of the most succesful corporate are headed by ex-engineer...

bytheway, take a deep breath..

by raf | 26th Jun 12, 4:12pm 1340683966

Engineers are useful, as they tend to actually look dispassionately at how systems work, not how people imagine they do :-)

by steven | 26th Jun 12, 4:14pm 1340684044

excellent I'll apply for the post, what was the salary again?

regards

by Chairman Moa | 26th Jun 12, 5:06pm 1340687160

a cool 600K I believe.. but then Steven if you are a hot shot IT contractor you could be on a good whack too..

by Basel Brush III | 26th Jun 12, 5:43pm 1340689426

As I recall about 90% of the China leadership are engineers.

Whether they can weather the approaching storm will prove how good they are (or not).

http://www.thecrimson.com/article/2011/4/14/engineering-engineers-science-new/

by Chairman Moa | 26th Jun 12, 5:47pm 1340689672

Whether or not they can weather the approaching storm.. they are the King right now.. even the mighty yankees are depending on them..

by Kunst | 26th Jun 12, 4:19pm 1340684348

Why not give the job to a top qualified marksman from the NZarmy ?

by steven | 26th Jun 12, 4:27pm 1340684847

LOL, and unlimited ammo?

regards

by powerdownkiwi | 26th Jun 12, 4:30pm 1340685036

It worked for the Gov Gen.

by Chairman Moa | 26th Jun 12, 5:08pm 1340687289

unlimited ammo??? We don't have enough dosh to buy them .. we don't even have a decent air force..

Second thought how about Made in China ammo from $2 shop???

by scarfie | 26th Jun 12, 11:01pm 1340708499

No no, the ammo would be symbolic and thus have to be gold. Actually thinking about it the balistics of gold would be better than lead.

by goNZ | 26th Jun 12, 8:18pm 1340698701

A Wheeler but is he a Dealer ?

by powerdownkiwi | 26th Jun 12, 8:58pm 1340701108

Actually, he may have some relevant skills. Just heard someone saying he'd studied stagflation.

Can't imagine a better grounding for what is coming.

by raf | 27th Jun 12, 11:03am 1340751814

PDK....They said Bernanke was an expert on the Great Depression....also note Mr Wheeler has been advising Russian Investors on privatization. Well that will come in useful here :-)

by powerdownkiwi | 27th Jun 12, 11:12am 1340752358

Yes - it was unlikely that the existing leadership would identift the new paradigm, and having failed to do so, it was certain they'd put the wrong person in the job. Of course, if they understood what was hitting them now, they'd question the job itself.

by David B | 27th Jun 12, 10:26am 1340749574

What's this? You mean none of y'all geniuses in here were tapped for the position? Well fancy that.

by David George | 27th Jun 12, 6:03pm 1340777008

The PTB prefer to just click on Interest.co for free, quality advise from us all, DB.

by Wolly | 27th Jun 12, 4:36pm 1340771805

"...which currently requires Bollard to keep headline medium-term inflation within a 1-3% target band."

Hello fellow peasant...wanna know what the target really means!...it's the rate at which your currency is debased each year...count on the real number being at or above the 3% mark.

Save as much as you can and pay tax on the piffling bank interest...then deduct the 3% to discover...you have been screwed.