Leadership change coming as trust in RBNZ tested
New Zealand’s Reserve Bank (RBNZ) is set for a leadership shake-up, with Finance Minister Nicola Willis (pictured left) expected to announce a new governor in the coming weeks.
Economists say the appointment will be crucial to restoring credibility after both governor Adrian Orr and chair Neil Quigley unexpectedly departed earlier this year.
Interim governor Christian Hawkesby (pictured right), who has confirmed his interest in staying on, acknowledged the challenge ahead, Reuters reported.
“We face a test of trust and confidence in us as an organisation,” Hawkesby said earlier this month. “I want to assure you that we are resolutely focused on our mandate of delivering low and stable inflation in the medium term, and a resilient and enabling financial system.”
Speaking at the Financial Services Council conference, Hawkesby said the RBNZ had been “the news” rather than just “in the news” this year, but stressed governance reforms such as the Monetary Policy Committee and dedicated RBNZ Board provide continuity during transitions.
Political pressure and independence concerns
RBNZ has long been considered one of the more independent central banks globally, but that reputation has been tested. Prime Minister Christopher Luxon has publicly said he told the central bank what he thinks it should do with rates — a rare intervention in New Zealand politics.
“In the past, central banks (globally) were largely left alone to do that, but now it’s becoming more challenging,” John McDermott, former RBNZ chief economist and now head of economic institute Motu, told Reuters. “Some politicians just want to take over... and there’s been an element of that in New Zealand as well.”
McDermott has been named as a possible applicant for the top job but declined to comment. Other names include Treasury chief economist Dominick Stephens, while Canada’s deputy governor Toni Gravelle confirmed he is no longer in the running.
Rebuilding credibility after policy missteps
The leadership changes cap a difficult few years for RBNZ.
The bank was criticised for fuelling inflation by injecting stimulus during COVID-19, then hiking rates aggressively to engineer a recession and rein in prices. An internal review later defended the emergency measures, but public trust has eroded amid cost-of-living pressures.
RBNZ has since slashed rates by 250 basis points to 3% and signalled further easing, but confidence remains weak. Business and consumer sentiment is low, unemployment is at a five-year high, and record numbers of New Zealanders are heading overseas.
McDermott said restoring confidence in inflation control must be the priority.
“Trust is hard to win and easy to lose. And so it’s going to be a long journey,” he said.
Market expectations and reform wishlist
Analysts say the next governor will need to prove independence while improving transparency. Oliver Hartwich of the New Zealand Initiative argued that an outsider might find it easier to reset.
“It’ll be easier for someone who’s not connected to the current regime, and potentially even a foreigner… I will just implement what needs to be done,” Hartwich said.
Former RBNZ chair Arthur Grimes agreed stability will depend on keeping experienced economists at the bank.
“If you don’t hear about the Reserve Bank from one month to the next or one quarter to the next, it’s doing a good job,” Grimes said.
Westpac chief economist Kelly Eckhold said that introducing formal votes on monetary policy and press conferences after every decision would boost confidence.
“Explicit votes, combined with an explanation of each member’s rationale, would clarify both the options under consideration and the level of support for each,” Eckhold said. “This reform would help anchor expectations and potentially reduce market volatility surrounding policy announcements.”
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