Michael Reddell: What was the story re Orr’s resignation?

It is almost six weeks since the shock announcement early on the afternoon of Wednesday 5 March that the Governor of the Reserve Bank, Adrian Orr, was resigning effective 31 March, and that in fact he had already left and an acting Governor was already in place. Orr had been (controversially) reappointed in late 2022 to a second five-year term that still had a little over three years to run.

In his seven years in office he’d been a near-constant figure of controversy, not least for his role as chair of the Monetary Policy Committee which had not only let inflation run out of control then needing to bring about a (mild) recession to get back in check, but for the $11 billion of losses the Bank had sustained punting in the government bond market. His relationships with anyone but sycophants and yes-men seemed strained – whether the rapid turnover of senior managers, his treatment of external critics, or the very evident rather dismissive and at best frosty relationship with the current Minister of Finance when she was in Opposition. On many occasions – including at numerous select committee hearings – his relationship with the truth also seemed tenuous.

It is good to see the back of him, but it really isn’t adequate that we’ve had no explanation at all for the sudden departure, sufficiently precipitate that he simply walked off the day before he was due to host a research conference, with speakers of the eminence of Ben Bernanke, to mark 35 years of inflation targeting. Orr’s own comments – the only ones being in the official statement (linked to above) – shed no light at all on the reasons for his resignation or for the precipitate departure. Neither the Bank’s Board nor the Minister of Finance has shed any light at all, including on why they allowed their employee to simply walk off with no (effective) notice whatsoever. What were the relevant provisions in his contract, and were they enforced? One can think of circumstances in which an employer might want an employee- senior or junior – out instantly (eg if there were serious behavioural issues or if someone was resigning to take up a position that involved a direct conflict of interest – eg when Don Brash left the Reserve Bank to go into politics, or if Orr had resigned to go and work for a bank or funds managers), but generally people expect to (and are expected/required to) give a decent amount of notice and to work out that notice. As just one example, when the Deputy Governor resigned a few years ago he gave four months notice. Why wasn’t Orr working out a decent length of notice?

I’ve been looking back through articles etc from 5 March, and what limited material has emerged since. The line that caught my eye was from Infometrics’ Brad Olsen on the day of the resignation:
“Let’s be very blunt. The Board of the Reserve Bank needs to front, they need to front urgently, and they need to be open and transparent. Anything less is just not acceptable”

And yet “anything less” is just what we have got. No straight answers from either the Board or the Minister of Finance. The Bank likes to boast of its commitment to transparency, but as I’ve had cause to observe numerous times over the years while they are very open about things they want us to know, they are consistently obstructive about much of the rest. Serious transparency involves openness even when it is uncomfortable or embarrasing. Anything else is really just PR/spin.

Early candidates for the explanation for Orr’s departure were disputes with the Minister of Finance over either (or both) the Bank’s budgets and (forthcoming new) Funding Agreement or bank capital etc regulation. It had been only a week previously that the Minister had finally confirmed publicly that she would be looking for savings from the Bank.

Neither of those factors ever seemed adequate to account for what we knew. After all, despite suggestions that the Bank had actually been bidding for more funding, pretty much every government agency had had to live with budget cuts in the last year, and no other chief executive is known to have tossed his/her toys and stormed off in process. The Bank and Governor must have known that fiscal restraint was going to come for them too. And the Board chair told us that while discussions were ongoing nothing had been finalised by 5 March. And even if the Governor had concluded that in his best professional opinion the Bank couldn’t do its job on the level of funding the Minister and/or Treasury were proposing, why storm off with no notice (around a not-yet-finalised agreement) when the new Funding Agreement was not even due to come into effect until 1 July this year? Giving notice that he’d be going on 30 June would have seemed to (relatively) mature and responsible approach had fiscal concerns been the key to Orr wanting to leave.

Much the same goes for issues around bank capital regulation. The Minister has been quite open that she had been taking advice on possible changes to the legislation to allow her to determine key prudential policy parameters. Reasonable people can and do differ on that. A central bank Governor might have regarded such changes, had they been confirmed, as simply unacceptable and not a regime he/she would be willing to work under. But there do not seem to have been any confirmed decisions, legislation takes time to put in place, and again…..3-4 months notice would have been quite reasonable if the Governor had concluded that someone else should pick up the baton for the years ahead. There is nothing of such apparent urgency to account for simply walking off with no effective notice at all.

Same goes if the Governor had simply come back from his summer holiday and decided he no longer has enough “gas in the tank”, was tired, and thought it was time to go. Plenty of people do come back from holidays thinking it is time for a change (plenty of them then settle back into the routine of the year), and look around for another job and/or give notice and move on. People might even sympathise with a senior official who got to that point. But it doesn’t make sense of Orr’s departure….with no effective notice at all.

If anything, the mystery – and a sense that the Board and Minister are keeping important stuff from us – was highlighted by the OIA response obtained from the Minister of Finance by the Herald’s assiduous Jenee Tibshraeny, as reported here. (I’m guessing she probably has a similar request in with the Bank itself, but is probably being obstructed and delayed there.)

Those documents suggest that Orr had last met with Willis on 24 February. By 27 February, Board chair Neil Quigley had been in touch with Treasury Secretary Iain Rennie about Orr, and Rennie advised the Minister of this conversation (substance of which was withheld). Most strikingly, the documents show that on the morning of 5 March “Reserve Bank staff sent Willis’s staff a draft press release for the resignation announcement, dated 10 March” (the following Monday, and after the inflation targeting conference was out of the way). And yet by 1:30pm on the 5th the resignation announcement went out – Orr himself was already out – with staff (on both sides of Bowen St/The Terrace) having scrambled to finalise press releases.

Something must have happened that morning. It simply cannot have been developments around either the funding agreement or bank regulatory policy (and although I can’t verify these claims I have heard a couple of times from people I trust that (other) people very close to the situation have confirmed that neither was the explanation for either the departure or the suddenly expedited announcement and no-notice nature of the exit).

Then there is the other document reported in the Herald article: some proposed Q&As for the Minister prepared by her press secretary. This particular press secretary must have been particularly averse to openness, suggesting that in response to a question “Did you ever have disagreements with Adrian Orr” she answer (in essence) “no comment”, when surely almost any minister and agency CE worth their salt would have disagreements, including on policy issues, from time to time.

Then there was this one


Click to view

Which has to be the ultimate answer designed to deflect, and yet in the process suggested there really was something there. David Farrar picked up on this issue thus

Click to view

It would be pretty extraordinary for a senior official to raise his/her voice with a minister (sadly, vice versa is not unknown), and although Orr was not formally a public servant, it would still be pretty grossly unacceptable behaviour from such an official and something the Board should have been alerted to. Unfortunately, Orr’s impulsive and undisciplined nature means that raising his voice at the Minister sounds all too plausible.

But, even if so, still not an adequate explanation for why the resignation was brought forward at the very last minute.

The Herald article also reports that (a) the Minister told her press secretary not to give out the purpose of the 24 February meeting (not exactly committed to transparency is she?), b) wasn’t briefed by her press secretary on answering questions re bank capital (presumably the press secretary didn’t think that was the story), and c) Willis was advised to say “not that I’m aware of” if asked if the resignation had anything to do with either the funding agreement or her opposition to his 2022 reappointment.

So where does it leave us? We – the public – are clearly being stonewalled by both Willis and the Bank’s Board (while Orr, now no longer a public official is saying nothing at all). The usually supine Finance and Expenditure Committee – currently launching an inquiry into improving performance reporting and public accountability – is living down to form.

Faced with the set of facts (the unquestioned known ones), and applying something like Occam’s Razor, most reasonable people would deduce that something pretty serious and potentially scandalous must have gone on. The facts?

• resignation with no-effective notice (out of the door by the time the announcement hit the screens (Quigley told questioners that the acting Governor had been in place from “lunchtime today”)
• resignation on the eve of a significant and fairly prestigious conference, where CEO level hospitality would normally have been expected,
• resignation accelerated at the last minute (10th brought forward to the 5th),
• person resigning not indicating anything about (a) a new job, and b) even general new career directions,
• other proffered stories (funding, bank capital) making no sense of the stylised facts, even from an undisciplined and volatile character like Orr. (Health hypotheses also don’t work, as even a short non-specific mention of health as the explanation would have quickly allayed questioning and resulted in widespread sympathy.)

There are, of course, problems with a conduct/scandal hypothesis.

Specifically, Neil Quigley appears to have denied it at his hastily-called short press conference later on the afternoon of 5 March. Someone who was there kindly sent me a transcript, which this draws from.

Quigley’s first answer on this point might appear to have wriggle room. Asked if there were “any conduct issues outstanding”, Quigley replies with a simple “No”. But, of course, it isn’t exactly unknown for questionable conduct to be dealt with by way of quid pro quo: someone resigns and an issue is taken no further. Once the resignation is lodged and accepted (as it clearly was by late on 5 March) there wouldn’t be any conduct issues “outstanding”.

But a later question seemed to allow less wriggle room: asked whether there were any “policy, conduct and performance issues which are at the centre of this resignation”, Quigley responded “we have issues that we’ve been working through, but there are no issues of that type that are behind this”, and in a follow-up clarified that the issues they’d been working on had been the policy/funding issues. But was he then primarily answering about “policy” rather than the other limbs of the question?

There is also a final question, where the transcript isn’t fully clear. Quigley appears to have been asked if there are “current issue with Adrian” and if there had been “any complaints”. He is recorded as responding “I’m not going to go into that because that’s history”, and something about “some things that have made as a public record’ [perhaps past concerns about Orr’s treatment of people like Roger Partridge and Martien Lubberink] “but I don’t intend to go into those now” before he walked off and terminated the press conference.

Quigley also stated that Orr had still had his (Quigley’s confidence), while avoiding answering a question that was about the Board’s continuing confidence.

The problem is that Quigley (a) doesn’t seem to be giving straight answers, and b) has form. Thus, if the only thing you read was the transcript of his press conference you’d get the sense that the story was somehow about Orr feeling the job had been done and it was time to move on. But that makes no sense of what we now know (the rush to bring forward the announcement to that afternoon), and he provided no compelling explanation when asked why Orr hadn’t just stuck round long enough even just to be hospitable at the conference. And even what he did say doesn’t make much sense of a “time for a change” story, noting that he and Orr had been in discussion on “this and exactly how it would play out over a few days”.

And, as to Quigley’s “form”, regular readers will recall his denial – and putting Treasury in a place where it went public with a denial – that there had ever been any sort of blackball on expertise when the first MPC members were appointed five years ago. Not only did personal testimony contradict him (people who were told by Quigley himself they would not be considered because they were active experts), but so did the documentary record (OIAs), and comments from one of his own fellow Board members who’d been actively involved in the selection process back then.

One final straw in the wind is that just a few days after Orr left, a release quietly appeared on the Reserve Bank’s website advising that one of Orr’s several deputies, an Assistant Governor responsible for Information, Data, and Analytics, had resigned. There was no indication of any other job to go to, and the departure date was less than three weeks from the date of the announcement (by contrast, another Assistant Governor resigned last year, offering more than two months notice). Perhaps there is no connection to Orr’s departure. But the coincidence in timing, with no specific job to go to, should at least prompt some questions.

We (the public) still have no idea what actually happened. And that really isn’t good enough from either the Board or the Minister about the holder of such a consequential office. But what we do know is enough to lead a reasonable interpreter to fear that it really may have been something around Orr’s conduct. If not (and one genuinely hopes not) a straightforward explanation could set the record straight very quickly. And if so, people shouldn’t be able to hide behind private commitments to secrecy that might serve the interests of some of the powerful, but are hardly likely to serve the public interest.

Michael Reddell spent most of his career at the Reserve Bank of New Zealand, where he was heavily involved with monetary policy formulation, and in financial markets and financial regulatory policy, serving for a time as Head of Financial Markets. Michael blogs at Croaking Cassandra - where this article was sourced.