WELLINGTON (Reuters) - New Zealand’s appointment of national pension fund chief Adrian Orr as the next central bank governor was welcomed by investors who had feared that a dual mandate under the new Labour-led government could have led to more unorthodox monetary policy.
The new coalition government campaigned on a bid to make the economy work for its people, putting housing and employment at the heart of its political agenda.
As part of that, the government launched a review of the Reserve Bank Act to add maximizing employment as a monetary policy goal alongside inflation - in a historic move for the first central bank ever to adopt an official inflation target.
Those plans, along with the finance minister’s comments that he wanted a governor that would adhere to the dual mandate, had sparked some worries that the central bank could lose its focus on inflation, analysts said.
The appointment of Orr, a former deputy governor who also worked as chief economist for the bank, appeased some of those concerns, pushing the New Zealand dollar to a two-week high.
“Adrian is pretty well known in markets,” said Michael Reddell, a former RBNZ official who served with Orr on its monetary policy committee in the 1990s.
“It’s not someone who’s totally flaky leftwing, because no one’s had a clear sense of who was in the running and it could have been someone out of left field who is more strongly perceived as highly dovish.”
The New Zealand dollar NZD=D4 hit $0.6930 late on Monday against the U.S. dollar, and remained close to those levels at around $0.6929 on Tuesday.
The currency, the world’s 11th most-traded, has fallen nearly 6 percent since the September election brought in a more protectionist Labour-led coalition in the first change of government for a decade.
“He’s perceived as fairly level headed,” said Stuart Ive, a Wellingon-based dealer at OM Financial.
Orr, who was RBNZ deputy governor for four years before joining the New Zealand Super Fund in 2007, will take over from Grant Spencer on March 27.
Finance Minister Grant Robertson said on Monday that the laws to change the bank’s mandate would likely not be in force by March, but the policy target agreement between him and Orr would be “developed in a manner consistent with the direction of reform.”
In November, Robertson told Reuters that willingness to focus on lifting employment, alongside inflation, would be key in accepting the RBNZ’s choice for the next governor.
“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,” Robertson told reporters on Monday.
In addition to his background both at the central bank and private banking, he is considered to have strong communication skills - a must for a central bank governor.
“He sometimes has got a very colorful turn of phrase, he uses metaphors in a way which sometimes (is) very memorable,” Don Brash, former RBNZ governor who overlapped at the bank with Orr, told Reuters. “He is a very good communicator.”
Reddell also praised his communication skills but said he could be too colorful for some people.
“He’s a larger than life character and whether you want governors that are larger than life, people will have different views on that,” Reddell added.
Reporting by Ana Nicolaci da Costa and Charlotte Greenfield; Editing by Eric Meijer and Kim Coghill