Opinion: Bernard Hickey surveys the potential candidates to replace Reserve Bank Governor Alan Bollard and wonders if a new Governor might change things

By Bernard Hickey

There is a wide and deep set of candidates to replace Alan Bollard when he retires after 10 years as Governor of the Reserve Bank on September 25.

Unlike with the recent appointment of the Secretary of the Treasury, where the Government was forced to go offshore to pick British public servant Gabriel Makhlouf, this time the board of the Reserve Bank and the government have a significant number of highly qualified local candidates to choose from.

Here's my assessment (for what it's worth) in no particular order of preference.

Adrian Orr

Orr is the current Chief Executive of the New Zealand Superannuation Fund.

Appointed in January 2007, he is widely thought to have run a steady but fast-growing ship at the fund, which has ridden through the Global Financial Crisis with relative ease and a reasonable investment performance.

The Super Fund has also done some innovative things on his watch, including investing in Shell's New Zealand assets alongside Infratil and Orr has communicated well with the public.

Orr is a down-to-earth and engaging character. He is the most accessible of the candidates from a public point of view, I think.

He has a matey, self deprecating style that is genuine and helps him communicate often complex topics to a broad audience. However, the folksy style disguises a deep knowledge of economics, banking and financial markets.

Before his appointment to the NZ Superannuation Fund, Orr was the Deputy Governor of the RBNZ and its Head of Financial Stability, so has reasonably recent and deep knowledge of the bank from both the prudential/regulatory side and the economics side. Before that role many business watchers will remember Orr for his stints as the Chief Economist for both Westpac and The National Bank. He also spent a stint as the Head of Economics at the Reserve Bank and worked as an economist at the OECD in Paris in the early 1990s.

My impression of Orr is that he is a pragmatist able to work with both sides of politics. He was appointed to his current role under Labour and he adjusted to the government's change of tack for the NZ Superannuation Fund in 2009 when it directed the fund to invest more in New Zealand. See Finance Minister Bill English's directive here and the NZ Super Fund's response here.

The fund has invested more in New Zealand and has focused, in particular, on farmland. See Gareth Vaughan's article here from May 2010, which includes a Double Shot interview with Orr, included below.

Here's a useful profile of Orr from Eloise Gibson at Stuff from September last year, which mentions Orr's grandfather migrated to New Zealand from the Cook Islands in the 1930s.

See also an interview Orr gave to Q&A's Paul Holmes in August 2010 on TVNZ.

And here's our interview below.

Grant Spencer

Spencer is the current Deputy Governor and Head of Financial Stability at the Reserve Bank.

He is clearly the most experienced internal candidate to replace Bollard, given Spencer's role as his right hand man through the Global Financial Crisis.

Spencer has regularly stood in for Bollard at both quarterly Monetary Policy Statements and half yearly Financial Stability Reports.

As the Head of Financial Stability, he was in charge of the Reserve Bank's move to introduce the Core Funding Ratio, which was brought in ahead of other prudential regulators and has been emulated by others.

Spencer can take at least some of the credit for the relative stability of New Zealand's financial system through the crisis, in particular in that dangerous period in late 2008 and 2009 when the bank had to take emergency action to provide credit to our banks, which were locked out of frozen international funding markets.

But he isn't just the prudential stability guy. He has also been the Head of Economics and Chief Manager of Financial Markets at the Reserve Bank.

Like the other main candidates, he has also spent a lot of time in corporate life. Spencer was the Head of Strategy and also Treasurer at ANZ between 1995 and 2004.

My impression is that Spencer is a safe pair of hands. An accessible and genial character, he slots in comfortably in the public eye. His experience at the Reserve Bank over the last three years of crisis will count in his favour.

The Reserve Bank is widely regarded as having run one of the best monetary and prudential policies around over the last four or five years.

Here's our video of Spencer speaking at last November's Financial Stability Report.

Rod Carr

Carr is the nearly man of New Zealand monetary policy scene.

He was acting Governor of the Reserve Bank for five months in 2002 after Don Brash's surprise decision to resign and run for parliament, but lost out to Bollard.

He had been Deputy Governor and is generally thought to have been unlucky not to get the top job ahead of Bollard, who shifted from his then role as Secretary of the Treasury.

Carr is currently the Vice Chancellor of Canterbury University and has an enormous job on his hands rebuilding the institution after the earthquake.

A South Islander, Carr has been living in Christchurch since he moved to become the Chief Executive of Jade Software in 2003. He took up his five year appointment as the VC at Canterbury in February 2009 and still has a couple of years to run there.

I haven't met Carr or seen him in action, but I'm told by others he is very well respected within the Reserve Bank and in governmental circles in Wellington.

He certainly has the experience both within the Reserve Bank and in the corporate sector.

Murray Sherwin

Also a former Deputy Governor of the Reserve Bank, Sherwin is currently the chair of the Productivity Commission.

He was appointed to that role by then Regulatory Reform Minister Rodney Hide in November 2010 and is also the Chair of the Canterbury Earthquake Recovery Commission.

Previous to that he was the Director General of the Ministry of Agriculture and Forestry.

He is one of the most senior civil servants and economists in Wellington with experience both inside and outside the Reserve Bank. 

Sherwin is also an engaging character in person and did good job with the Productivity Commission's first major investigation into housing affordability. See his video on that below.  See Alex Tarrant's article on that investigation here.

A Dow Jones poll of local economists in 2002 ranked him as the favourite to replace Brash.  See more background in this MAF release announcing his appointment in November 2001.

But will a new Governor change anything?

None of the the candidates have said much in public suggesting they question the current accepted wisdom in Wellington that the best way for the Reserve Bank to operate is with an inflation-targeting regime with little intervention in currency markets or capital controls.

The government itself is wedded to the current laissez faire model. More importantly, the key figures in the Reserve Bank, Treasury and the Prime Minister's Office are also wedded to this thinking. The views of most of the key players were forged in the mid to late 1980s when the bureaucracy and the economy were throwing off the Muldoonist shackles of the early 1980s.

I'd be surprised if the government took the opportunity of appointing a new Governor and finding a new Policy Targets Agreement to change course.

Your view?