Finance Minister Grant Robertson has accepted a recommendation from the Reserve Bank board that current New Zealand Superannuation Fund Chief Executive Adrian Orr become the next Governor of the Bank when acting Governor Grant Spencer retires at the end of March.
Robertson told a post-cabinet news conference that Orr, who has previously served as Deputy Reserve Bank Governor, was his top choice and would be popular with financial markets. The New Zealand dollar rose more than half a cent to a one-week high over 69 USc by early evening after the 4pm announcement.
"This will be an appointment that will be welcome right across the financial sector. Mr Orr is highly regarded. He does have expertise in a technical sense from his time at the bank previously, and is obviously a very well respected CEO as well," Robertson told the news conference.
"We're delighted about the appointment and if the markets are pleased that's a good thing too."
Asked if Orr was at the top of Robertson's list of possible candidates, he said: "Yes he was. He is a person who I have long held in high regard for the work that he's done at the Super Fund and when I thought about who should do the role, he was there."
"Clearly we have an open mind as to any other candidates that would have come forward and obviously the board felt the same way and made a unanimous recommendation about Mr Orr," Robertson said.
However, he acknowledged Orr would have to take a pay cut of almost 40 percent. Orr will also be moving from Auckland to Wellington, where the Reserve Bank is headquartered.
Orr was paid $1.22 million for the year to June 30, 2017 as the CEO of the NZ Super Fund, up 15 percent from the previous year and up 42 percent from the 2014/15 year. The size of the increases drew criticism from the then-Finance Minister Bill English and the State Services Commission.
Robertson said the Reserve Bank board chairman Neil Quigley had said Orr would be paid within the current band of pay for the current Reserve Bank Governor. The Reserve Bank's annual report for 2016/17 shows the Governor was paid in a band from $850,000 to $860,000, although this included $101,000 in cash for accrued leave, meaning the regular remuneration for the Governor was around $755,000.
The NZ Super Fund, which manages $37 billion, said Orr would move to Wellington for the role.
Robertson said he believed Orr had been part of the appointment process before the Government was appointed. He said Orr had been the first candidate put forward by the board, either formally or informally.
"He sees it as a great honour to serve his country in this role," Robertson said.
Robertson said he believed Orr would be a good 'change manager' for the Reserve Bank as it adjusted to a new Policy Targets Agreement with Robertson and prepared for changes to the Reserve Bank Act around its single mandate and monetary policy decision making towards a formal committee-style process, rather than having the Governor himself make the decision.
"One of the things I did was speak to the chair of the board when I first took up to ensure that the process of appointing the Governor included the candidates being aware of the direction that we were going in and to assess their ability to implement that direction," Robertson said.
"I've been assured by the chair of the board that Mr Orr is in a position to do that and that he will be able to manage a period of change well for the board, and I've accepted those assurances," he said.
"He has run the Super Fund extremely well. It is one of the most successful sovereign wealth funds in the world. The experience he got working in the real economy will be very useful as we go down the path of change."
Robertson later reiterated that the first Policy Targets Agreement would include the bank focusing on maximising employment as well as price stability. It will be signed before Orr takes up his appointment on March 27 and include work being done by a group reviewing the Reserve Bank Act.
"The review group is getting underway and are beginning to look at what kinds of language could be included in the Act. We'll use that to reflect that in the Policy Targets Agreement," Robertson said.