We should be thanking Orr rather than trashing him

Guest column by Simon Louisson.

Reserve Bank governor Adrian Orr. Source: RBNZ.

(When I returned to New Zealand in 1994, I was frequently impressed by Simon Louisson's sharp questioning at media conferences and developed respect for his journalistic skills. So when he let me know he disagreed with my view of the former RBNZ governor Adrian Orr, I invited him to write a guest column for Just the Business. Louisson tells me that former RBNZ media manager Paul Jackman had pretended to be Louisson in practice sessions ahead of media conferences. In that role, Jackman would ask Bollard or Brash: “Inflation is outside the band, why aren't your resigning?")

Former Reserve Bank Governor Adrian Orr’s shock resignation last week triggered squads of critics, including Jenny Ruth, mostly regretting that he quit before he could be fired.

Orr joined a growing number of government agency heads, including Margie Apa of Health NZ, Kainga Ora CEO Andrew McKenzie and Sarah Fitt of Pharmac who have essentially been pressured to resign by a government determined to install its own men (yes, mostly men), amenable to their neo-liberal agenda.

This Americanisation of the public service erodes the notion of an unbiased civil service that can give expert, independent advice.

When in opposition, National, led by Nicola Willis, made no secret of their antipathy towards Orr’s reappointment in late 2022.

While Orr has not disclosed his reasons for quitting, the pressure he faced from a hostile government was undoubtedly part of the decision and that has done lasting damage to the hard-won independence of the central bank.

While Orr was never displayed political colours, he was appointed by Labour’s Grant Robertson and appeared to be empathetic towards Labour’s broadening of the bank’s mandate to include employment considerations in addition to inflation.

In many ways, he was the anti-Brash governor.

Brash's sympathies

Appointed by the neo-liberal Labour government of David Lange, there was never any doubt that Brash’s sympathies lay with the neo-liberal political right.

He never made any secret of the fact that he had no commonality with ordinary Kiwis.

It was a huge sigh of relief that many of us breathed when that South Auckland vote rolled in in 2005 to maintain Brash’s run of multiple electoral defeats.

Brash the politician pursued dog whistle politics, denying the special position of Māori in Aotearoa, while pushing the political trope that “we’re all New Zealanders”.

His leadership of the ACT Party and the nearly overtly racist Hobson’s Pledge has led us to the divisive Treaties Principles Bill.

While Brash and his successor, Alan Bollard were dour, if not sour, in the case of the former, Orr, of Cook Islands and Irish descent, the Reserve Bank under Orr displayed humour, inclusiveness and, particularly during the Covid crisis, humanity and empathy for all.

Most importantly, Orr got us through that crisis, the most dangerous we have faced since the Great Depression.

People easily forget how scary that shock was.

Lockdown meant the economy crashed, with GDP initially down 30% for one quarter.

Gloomy forecasts

“We are going to have a depression,” said Bernard Hickey, one of the country’s leading economic commentators. “This is like an asteroid hit the global economy.”

An Auckland Chambers of Commerce survey predicted nearly one third of 1000 businesses surveyed said they would never reopen.

Infometrics economist Brad Olsen said people were dreaming if they thought the economy would bounce back to normal.

But it more or less has.

The then Labour government and Orr, as RBNZ governor, said they would do whatever it took to right the ship. The government borrowed billions and poured it into propping up businesses and people while Orr decided to roll the money presses and eased bank lending big time.

Certainly, mistakes were made. Instead of tanking, the property market took off big time and the lending tap should have been shut much quicker.

All sorts of unexpected things happened including thousands of Kiwis returning home. After all, the pilots were building the plane as they were flying it. But they landed it. Most businesses survived and most of us still had job and a house.

Simplicity Kiwisaver CEO Sam Stubbs was one of the few to praise Orr when he stepped down.

“He deserves respect for helping navigate our economy through a very tumultuous period, and being a dedicated and effective public servant. I think he played a good innings in a very tough match,” Stubbs wrote in The Post.

But Orr has received it in the ear from many, including Jenny Ruth, for the post-Covid crisis economic hangover.

Inflation was global

What a surprise that with all that monetary and fiscal stimulus inflation soared.

It was the same all over. Inflation in Aotearoa peaked at 7.3%, the UK rate went over 11% and the US rate went over 9%.

And quelle surprise, inflation stepped outside the target band and took a while to return.

Let’s remember that for six of the 10 years Alan Bollard was RB Governor, inflation was outside the target mostly grappling with the Global Financial Crisis and for Brash it was outside the band for four his 14-year tenure and he never did fulfil his promise to resign if it went off target.

NZ inflation was last reported at 2.2% and trending down while US and UK inflation was at 3.0% and rising.

How did Orr managed to wrangle inflation down?

Well again it’s a huge surprise (not). He tightened monetary policy and warned he was engineering a recession.

The sad thing is that while he was doing his mandated job, his critics in government simultaneously enacted one of the severest austerity programmes undertaken since WWII. Oh, and now we are in a recession. Blame Adrian.

My view is that every person in Aotearoa with savings, a house or a job should say a little prayer of thanks every night for a job that has been done well by Adrian Orr and best of luck to the next poor sucker in the now-politicised hot seat.

(Simon Louisson was a journalist for over 30 years and spent a good deal of that time covering the RBNZ. He is retired.).