Behind the scenes, governance shifts are reshaping a cornerstone of the economy
Reserve Bank of New Zealand governor Christian Hawkesby (pictured) acknowledged his organisation faces a “test of trust and confidence” following months of leadership upheaval, while assuring the financial sector the central bank remains focused on its core mandate.
Speaking at the Financial Services Council Annual Conference in Auckland on Thursday, Hawkesby said the RBNZ had been “the news” rather than simply “in the news” this year, referencing the departure of the previous governor in March and the loss of the board chair in August.
“Trust and confidence in our economic institutions is what underpins our financial system and supports economic prosperity for New Zealanders,” Hawkesby said during his opening remarks.
The interim governor, serving a six-month term, said the RBNZ remains “resolutely focused” on delivering low and stable inflation and maintaining a resilient financial system.
Hawkesby highlighted governance changes implemented over the past seven years, including the establishment of a Monetary Policy Committee and dedicated RBNZ Board, which provide continuity during leadership transitions.
The Monetary Policy Committee has focused on assessing the impact of increased global trade barriers following “Liberation Day” in April. While headline inflation has returned to the 1% to 3% target range, Hawkesby noted households and consumers retain memories of high inflation.
“In the May Monetary Policy Statement, we assessed that on net the bigger impact of the rise in trade barriers was the hit to global demand, weaker global growth, and consequently less medium-term inflation pressure in New Zealand,” he said.
By August, domestic confidence had taken a significant hit, with the economy appearing to stall mid-year. The central projection shows the Official Cash Rate falling to around 2.50% by year’s end, though the pace depends on economic recovery data.
The RBNZ Board is conducting a capital settings review for deposit-taking institutions, building on 2019’s Capital Review while considering new legislation and supervisory tools. Two options for capital settings described as “strong, simple, proportionate and internationally comparable” have been proposed, with consultation closing Oct. 3.
Hawkesby assured Financial Services Council members the RBNZ remains committed to completing the Insurance (Prudential Supervision) Act 2010 review. Cabinet agreed in August to recommendations for an amendment bill, focusing on regulatory framework modernisation rather than increased regulation.
The latest Relationship Charter survey showed 97% of regulated insurers rated their RBNZ relationship as “good” or “very good,” up from 81% previously.
What steps do you think New Zealand’s central bank should take to rebuild trust and stability? Share your insights in the comments below.
