Adrian Orr departs as Reserve Bank Governor, Deputy Governor Christian Hawkesby to be Acting Governor as work continues on new 5-year funding deal

Reserve Bank Governor Adrian Orr has resigned.

A statement from the Reserve Bank, below, doesn't say why Orr decided to leave.

Deputy Governor Christian Hawkesby will be Acting Governor until March 31. Then from April 1, Minister of Finance Nicola Willis, on recommendation from the Reserve Bank's board, will appoint a temporary Governor for a period of up to six months.

"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. However, there is much work left to do on the major multi-year strategies Reserve Bank is following. Ongoing focus and funding will be critical to these projects’ success," Orr was quoted as saying.

Reserve Bank funding is based on a five-year funding agreement between the Governor and the Minister of Finance.

"The Reserve Bank’s current funding agreement period runs from 1 July 2020 to 30 June 2025. The process of preparing for a new funding agreement for the period from 1 July 2025 to 30 July 2030 is underway. Agreement must be reached with the Minister before the current Funding Agreement expires," the Reserve Bank said in its annual report last year.

Orr's departure also comes against the backdrop of the ongoing parliamentary banking inquiry, which has featured calls for the loosening of the Reserve Bank's conservative oversight of New Zealand banks, including regulatory capital settings set in 2019 after a multi-year review.

In late 2022 the then-Finance Minister Grant Robertson appointed Orr to a second five year term, which began on 27 March 2023. Robertson said Orr's reappointment followed a unanimous recommendation from the Reserve Bank's board. At the time Willis, then in opposition, declared herself "appalled" that Orr's reappointment came without an independent review of the Reserve Bank’s performance.

'He chose to resign'

Willis said the Reserve Bank Governor had “chosen to resign” and that she wouldn’t make any further comments on the situation. 

“That is his decision, and individuals in any public office are able to make their own decisions about the time and resignations,” she said. 

“What I would say is that it is important that there is stability in our financial institutions, and I have complete confidence that there is stability and continuity”. 

Naomi Mitchell, Head of Communications at the Reserve Bank, confirmed Hawkesby was already Acting Governor, as would happen when Orr was on leave.

However, she would not say whether Orr had provided any explanation for his resignation or say what the status of his current employment was.

Infometrics chief executive Brad Olsen said he was stunned by the sudden announcement one day before the central bank was due to host a two day policy conference. 

It was unprecedented for a Governor to resign, effective immediately and without explanation.

“Let's be very blunt. The Board of the Reserve Bank needs to front, they need to front urgently, and they need to be open and transparent. Anything less is just not acceptable,” he said. 
 

RBNZ Governor Adrian Orr resigns

Reserve Bank of New Zealand Governor Adrian Orr has resigned and will finish in the role on 31 March.

Mr Orr, who was first appointed as Governor in March 2018, says it has been a privilege to lead an institution that plays a critical role in the economic wellbeing and prosperity of all New Zealanders.

“Over the last seven years we’ve significantly built our capability and capacity so we can respond to an increasing complex and challenging global environment. We’ve made considerable progress in our approach to monetary and financial policy, alongside driving much-needed maturity uplifts in our balance sheet capital, digital, data and technology.”

“We’ve advanced many major, multi-year programmes, to modernise and strengthen the RBNZ and the New Zealand financial system and led the implementation of strategies related to the Future of Money and Cash, Future of Payment and Settlements, Financial Inclusion, Climate Change, and Māori Access to Capital,” Mr Orr says.

“I’m incredibly proud of the RBNZ’s people, our work and the impact of our mahi on all New Zealanders,” Mr Orr says.

“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. However, there is much work left to do on the major multi-year strategies RBNZ is following. Ongoing focus and funding will be critical to these projects’ success.”

RBNZ Board Chair Professor Neil Quigley thanked Mr Orr for his leadership and commitment to the central bank. “Adrian has been critical to leading the institutional reforms needed to implement the new Reserve Bank Act, Deposit Takers Act, and Depositor Compensation Scheme. In particular, Adrian has demonstrated resilience and fidelity to the Bank in operationalising the changes in governance and decision-making that followed from the creation of a Monetary Policy Committee with external members from 2019 and the Reserve Bank Act coming into force in July 2022.”

“He has also driven a significant uplift in leadership and capability across the Bank, and modernised its culture to reflect contemporary New Zealand society,” Professor Quigley says.

Deputy Governor Christian Hawkesby will be Acting Governor until 31 March. From 1 April the Minister of Finance, on recommendation from the RBNZ Board, will appoint a temporary Governor for a period of up to six months. Mr Hawkesby will also chair the Monetary Policy Committee.

Willis, whose government has been focused on cutting spending, also issued a brief statement. It's below.

Finance Minister Nicola Willis acknowledges the resignation of the Reserve Bank Governor Adrian Orr, and his seven years of service.

“I wish him well for the future,” Nicola Willis says.

Mr Orr was appointed as Governor in March 2018.

Nicola Willis also welcomes Deputy Governor Christian Hawkesby, who will be Acting Governor until March 31.

Mr Hawkesby has served as Reserve Bank Deputy Governor since 2022.

From April 1 the Minister of Finance, on recommendation from the RBNZ Board, will appoint a temporary Governor for a period of up to six months.

Staff number up as role broadened

In 2023 interest.co.nz reported the Reserve Bank had doubled staff numbers in five years to 510, with its personnel costs rising to $80 million from $32 million in 2018. The Reserve Bank's 2024 annual report shows full-time equivalent staff of 601.3, with staff expenses of $94 million and operating expenses of $182 million.

The significant increase in full-time equivalent staff and personnel costs has come as the central bank and prudential regulator has stepped up the oversight of banks, insurers and non-bank deposit takers such as finance companies, credit unions and building societies, and seen its responsibilities extended through the likes of the Reserve Bank of New Zealand (RBNZ) Act 2021, and the Deposit Takers Act.

Capital expenditure sought

In February last year interest.co.nz reported the Reserve Bank's briefing to Willis as incoming minister said its next five-year funding agreement, to be entered into from July 2025, would include both operating expenditure and, for the first time, capital expenditure.

"Our dividend policy and balance sheet are potentially relevant considerations for this discussion," the Reserve Bank said.

"We have a significant programme of work underway that will need to be rolled over into the new agreement. This work includes legislated change (the Deposit Takers Act and Depositor Compensation Scheme), investment in our information, data and analytics strategy, and improvements to our digital and cyber resilience. The capital expenditure required for significant infrastructure projects – the refurbishment of 2 The Terrace and Project Waitoa [developing and implementing new vaulting and cash processing infrastructure] – will need to be included in the next funding agreement."

The Reserve Bank, which by law is the sole supplier of New Zealand banknotes and coins, paid a $597 million dividend to the Crown last year. That was its first dividend in three years and came as Orr took a pay cut.

The Reserve Bank's 2024 annual report goes on to say;

Our 2020 funding agreement with the Government initially provided funding from 1 July 2020 to 30 June 2025, totalling $640 million over this five-year period. Certain operating expenses have been excluded from the funding agreement on the grounds they are unpredictable, outside the Reserve Bank’s control and potentially of a size that could crowd out other activities.

In light of new legislative requirements, and required investment, an additional funding request was made to the Minister of Finance for the last two years of the current five-year funding agreement. In July 2023, the Minister of Finance provided a $79 million uplift. This confirmed the Reserve Bank’s funding source for project expenditure, which was outside the initial 1 July 2020 to 30 June 2025 five-year funding agreement (e.g. Deposit Takers Act and Depositor Compensation Scheme), plus some additional funding to support various key infrastructure projects and under-resourced key areas. During 2023/24, the operating costs of the Reserve Bank increased, following the final budget approved by the board to support this work.

Our cumulative funding agreement underspend of $49 million has been largely driven by COVID-19 related delays in planned organisational growth in 2020/21, and delays in operationalising projects for which additional funding was received in 2023/24. We have carried this into our 2024/25 budget, being the last year of this five-year funding agreement.

*Additional reporting Dan Brunskill.