By David Hargreaves
Finance Minister Steven Joyce has tackled a tricky problem by appointing Grant Spencer as Acting Governor of the Reserve Bank for the six months immediately following the election.
Spencer, who has indicated he won't seek the job fulltime, will retire after the six months. He will replace in an interim role the current Governor Graeme Wheeler, who as expected, has said he's not seeking another term.
One person seen as a likely candidate for the Governor's job - if available - is the chief executive of the NZ Super Fund Adrian Orr. He was Deputy Governor of the RBNZ till joining the NZ Super Fund in February 2007. Another former RBNZ Deputy Governor and indeed Acting Governor, Rod Carr, who was chairman of the RBNZ board till last year, is seen as another possibility. Carr is vice-chancellor at the University of Canterbury.
The tricky thing for the Government is that Wheeler's five-year term expires on September 26, just three days after the election.
If the Government had appointed a new Governor before the election this would have meant that this new Governor might not meet the approval of a new Government - in the event of National losing the election. Secondly it's possible the Policy Targets Agreement (PTA) signed between the Governor and the Finance Minister would have to be renegotiated twice in a short space of time before the election.
The appointment of Spencer, the current Deputy Governor and Head of Financial Stability gets around this and is likely to be viewed favourably as a compromise situation.
Joyce said that Wheeler had led the bank in a very calm and expert manner and done a good job.
The Reserve Bank has been seeking to get debt-to-income ratios incorporated into its 'macro-prudential toolkit' although it has promised it wouldn't use them at the moment. Wheeler and previous Finance Minister Bill English had discussed these toward the end of last year, but the Government has appeared resistant.
Joyce said he would have "more to say on that in the next little while". They were "still live". Joyce stressed that there would be continuity, and this included with the PTA which would be rolled over as is straight after the election for the six months Spencer is Acting Governor.
Joyce indicated that in the event National is re-elected, he didn't see the need for any significant changes to the PTA, which he believed had served NZ well as it stands. It targets inflation between 1% to 3% with a focus on achieving the 2% midpoint of that range.
This is the announcement from Joyce:
Finance Minister Steven Joyce will appoint current Deputy Reserve Bank Governor Grant Spencer as the Acting Governor of the Bank for six months, following the expiry of current Governor Graeme Wheeler’s term on September 26 this year.
"Mr Wheeler's term as Governor expires on September 26, three days after the general election, and he has decided not to seek reappointment," Mr Joyce says. "Following advice from the Cabinet Office and consultation with Cabinet, I have decided that the most appropriate course of action would be to appoint an acting Governor for a six month period to cover the post-election caretaker period. This will give the next Government time to make a decision on the appointment of a permanent Governor for the next five year term.
"I have decided to appoint Mr Spencer as acting Governor from 27 September 2017 to 26 March 2018, on the advice of the Reserve Bank Board of Directors. The Government is pleased to have someone of his calibre to move into the role. He is a highly experienced member of the Bank’s Leadership team who will provide stability and continuity through this caretaker period prior to the appointment of the new Governor."
Mr Joyce and Mr Spencer have agreed that there will be no change to the Policy Targets Agreement for the period Mr Spencer will be acting Governor.
Mr Spencer has advised the Government that he won't be applying for the permanent role, and intends to retire following his period as acting Governor.
The Bank has had one previous acting Governor. Former Deputy Governor Rod Carr was appointed in an acting capacity for the pre-election and caretaker period around the 2002 General election, following the resignation of Governor Brash.
Mr Joyce thanked Governor Wheeler for his service to the Bank.
"The Governor has performed his role calmly and expertly during a highly unusual period for the world economy. I thank him for his service up until now and for the remainder of his term as Governor," Mr Joyce says.
And this is the announcement from Wheeler:
Reserve Bank Governor Graeme Wheeler today announced that he will not be seeking a second term as Governor when his current term ends on 26 September this year.
Mr Wheeler said: “It has been a great privilege to serve in this role, and in the remaining eight months I will remain fully focused on the economic challenges and opportunities facing the New Zealand economy. It was my intention, when I was appointed, to serve one term, and then to take on governance roles.”
Mr Wheeler was previously employed at the World Bank from 1997 until 2010, where he was Managing Director Operations (2006-2010), and Vice-President and Treasurer (2001-2006). From 2010 to 2012, he ran his own advisory business in the United States.
Under section 40 of the Reserve Bank of New Zealand Act, the Governor is appointed for a five-year term by the Minister of Finance, on the recommendation of the Reserve Bank Board.
The Chair of the Reserve Bank Board, Professor Neil Quigley, said the Government has advised the Board that, because of the proximity of the General Election this year, the Board’s recruitment process to identify a successor to Mr Wheeler needs to commence later in the year, and an acting Governor would be appointed to cover the post-election caretaker period.
The Minister of Finance, Steven Joyce, has, on the Board’s recommendation, announced the appointment of Grant Spencer under section 48 of the Reserve Bank Act to act as Governor for a period of six months on the conclusion of Mr Wheeler’s term. Mr Spencer had indicated his intention to retire this year but has agreed to defer in order to fill the acting role.
Mr Spencer is Deputy Governor and Head of Financial Stability, a position he has held since 2007. He serves as chair of the OECD's Committee on Financial Markets, and has held senior management positions at the Bank in economics and financial markets.
In 1995-2004, Mr Spencer was with the Australia and New Zealand Banking Group, holding senior management roles in treasury and strategy in New Zealand and Australia. He has also served terms with the International Monetary Fund as a Special Advisor, European Department, and as New Zealand’s Alternate Executive Director.
13 Comments
... is Grant Spencer any relation to Frank Spencer ?
Oooooooooooooh Betty .... I'm having a spot of bother ... I put the interest rates up like they told me to .... but it's no good ... everyone is still borrowing too much .... yessssss , that's what they're doing , you know ...... ummmm , I'm think I'm being harassed , Betty .... what am I going to do ?
Revealing your age GBH.
One thing Spencer did when he took over from Adrian Orr was to censor the disclosure OMO related RNBZ NZD sales in the near term currency swap curve (NZD/USD?), stating the market would confuse these actions with official currency intervention. Hogwash.
A move back to RBNZ transparency in respect of these interventionist actions would be appreciated by all market participants operating outside counterparty bank (foreigners included) dealing rooms.
Joyce reckons Wheeler did "a good job"?....
On my calculations he met his target of CPI between 1-3% for 6/17 of the quarters i.e. 35% success rate.
Would a plumber whose plumbing leaked 65% of time be said to have done a "good job". Would an accountant who only balanced the ledgers 35% of the time be said to have done a good job?
I want Joyce as my boss.
Graham Wheeler , was a poor Reserve Bank Governor. Fixated on his models, he needlessly raised the OCR and then marched it all the way back again. The Riksbank had already gone the same route and was widely scorned, before relenting and going negative. Graham got the central bank of the year award. His belief that the New Zealand central bank selling NZD was going to have a meaningful outcome in fx markets, was either stupidity or smoke and mirrors. His media briefings were inept. His major concern on coming to office was the price of Auckland housing . He has achieved nothing.
And you could have done better. Many things were beyond his control - he dropped interest rates and the dollar stubbornly stayed high. I think you believe he has more control than he actually does. You use the example of Central Bank intervention in the FX market as an example of his ineptitude - I think it is an example of the market and how unpredictable and uncontrollable it actually is - put simply the market doesn't care.
Our central bank made a policy error in 2014 , needlessly raising interest rates 4 times and lamenting our exchange rate is 'too high'. In terms of fx , and our central banks ability to meaningfully affect the exchange rate by selling/buying NZD or any other means of 'talking ' the currency down is absurd, given the little warchest.' Many things' are beyond our central banks control, but doing the exact opposite to every other global central bank , is a recipe for idiocy. I would not have made the same choices. I made the forecast that Graham Wheeler would not seek an extra term I wonder why?
Hindsight is always 20/20, but to blame someone for a "policy error" in a time where there was unprecedented circumstances in terms of the world economy with no previous experience to draw on and then say you would have done different is rather arrogant. While other central banks were dealing with the various different situations that presented themselves to their individual economy's - Wheeler did what he believed was correct for the New Zealand economy - and I don't disagree with that. You are not (and suspect never will be) a central bank reserve governor - what qualifications do you have to argue with his policy decisions. Your prediction that Wheeler would not seek a second term is a binary choice - true / or false - don't congratulate yourself to much.
Maybe Wheeler got fed-up with the armchair economists who always criticised but never really came up with a better plan....
Wrong, the RBNZ could have considered the outcome of Sweden's ill timed raising of its OCR. Whether you agree with Wheeler's beliefs are irrelevant , few central banks have had to reverse course in such a manner as the RBNZ. Being a central banker does not prevent being judged for performance,whether it be by a kitchen hand or hand surgeon, arrogant or other. Wheeler's tenure has been one of inconsistency and failure in policy and speech. He is not the first central banker to have 'got it wrong', without the need for hindsight. True, it was a binary choice in suggesting Graham would go, I could have spent time forecasting many other economic issues. In regards to the OCR being a ternary event I appreciate that Graham required one additional dart.
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