7 Feb 2017

Reserve Bank Governor to step down in September

3:52 pm on 7 February 2017

Reserve Bank Governor Graeme Wheeler will not seek a second term and will step down from the role in September, he confirmed today.

09062016 Photo: RNZ/Rebekah Parsons-King. Governor of the Reserve Bank of New Zealand, Graeme Wheeler delievers lastest OCR annoucement.

Photo: RNZ/Rebekah Parsons-King

An announcement from Mr Wheeler on his future in the role was expected. It was usual for an announcement early in the Governor's final year to give certainty, especially in an election year.

The Governor is appointed for a five-year term by the Minister of Finance, on the recommendation of the Reserve Bank Board.

Mr Wheeler's current term will end on 26 September.

Deputy Governor Grant Spencer, who has also said he plans to step down, has been named as acting Governor, and will serve in that role for six months when Mr Wheeler's term ends.

Mr Spencer is also head of financial stability at the central bank, a position he has held since 2007.

Mr Wheeler said it had been a "great privilege" to serve in the role.

"In the remaining eight months I will remain fully focused on the economic challenges and opportunities facing the New Zealand economy. It was my intention, when I was appointed, to serve one term, and then to take on governance roles."

Mr Wheeler will deliver the first monetary statement of the year on Thursday. Financial markets were unmoved by the news today.

He was a surprise choice to replace Alan Bollard in 2012 - the expatriate Kiwi was a respected but largely-unknown senior official at the World Bank.

In a series of quick-fire hikes in 2014 the Official Cash Rate (OCR) moved to a high of 3.5 percent from 2.5 percent. That prompted a strong surge in the New Zealand dollar and coincided with a weakening world economy, a rapid fall in oil and dairy prices and significant fall in inflation.

New Zealand's comparatively high interest rates were out of step with the rest of the world. Mr Wheeler was forced into an about-face, cutting the OCR through 2015 and last year to its current record low of 1.75 percent.

During his tenure Mr Wheeler has been strongly criticised by some finance market participants for sending mixed signals about the bank's plans, and the way he was tackling the main priority of getting inflation back into the 1-3 percent target band.

"There have been times when markets and analysts have been a bit confused about where the Reserve Bank is going to be going and what his thinking has been," the chief forecaster of consultancy Infometrics, Gareth Kiernan told RNZ Business.

Unusually, the Mr Wheeler's struggle to meet its government-mandate drew comment from the then Prime Minister John Key, and Finance Minister Bill English.

The next governor is likely to come from outside the bank, with a group of former RBNZ staff potential candidates.

Early speculation has installed the head of the New Zealand Superannuation Fund, Adrian Orr, a former RBNZ deputy governor and chief economist, as a favourite.

Last week Mr Orr refused to be drawn when asked by RNZ Business if he might be a candidate.

The current vice-chancellor of Canterbury University, Rod Carr, who is also a former deputy governor as well as chair of the board, will also be in contention.

Michael Reddell, a former RBNZ senior official and now economics blogger, said a more pragmatic option would have been for Mr Wheeler to stay on for up to a year while a successor was found.

"It would be interesting to know why that didn't happen - was Wheeler not willing, or the Board or Minister not interested? No doubt, Spencer will be a safe enough pair of hands for six months," Mr Reddell said in a blog post.

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