The Governor as a Green

No doubt the Green Party has its place.  Some people –  a small minority generally, although rather a large minority around where I live –  vote for it.    Under our parliamentary system, that earns them some MPs, and at present –  a first –  they even have a few ministers outside Cabinet.     The critical point here is that those people were elected, and can be tossed out again if the voters get disillusioned.   They and their supporters champion their causes, as people on the other sides of politics pursue their own causes and views.

But if the contest of ideas and worldviews is integral to our political system, our system of government has also historically relied on senior public servants and holders of appointed public offices doing the specific job they were appointed to, and not using (unelected) public office as a platform, openly or covertly, for advancing their personal political or policy agendas in areas for which they have no responsibility.     Of course, many such people will have personal views on all manner of political and policy issues.   But we expect them (a) to keep those views to themselves, and (b) not to allow those personal views to influence the conduct of their professional responsibilities.   Historically, some holders of really senior public service or judicial positions have quietly chosen not to vote at all.   Respecting these sorts of self-denying conventions is all the more important the more power the holder of a specific office wields (the Deputy Secretary, Corporate in the Department of Internal Affairs –  say –  is a different matter than the Chief Justice, the Commissioner of Police, or the Governor of the Reserve Bank).  Keeping the personal and the professional separate is part of that ethos.

Why do these rules and conventions matter?   Because the office is supposed to be more important than the officeholder.   And one of the strengths of our system of government has been avoiding, to a large extent, the politicisation of the public service, or of that top tier of state appointments.    A capable Chief Justice, a capable Commissioner of Police (is there such a thing?), a capable Secretary to the Treasury should command confidence across the political spectrum, across the community, for their technical expertise, good judgement, shrewd advice (or whatever mix of skills is relevant to the particular position).  And part of that  should involve being able to be confident that the holder of any particular position is not using his or her office as a platform to advance personal and political views on matters quite unrelated to the role to which they have been appointed.  Apart from anything else, these officeholders are being paid, from your taxes and mine, to do a specific job.

And the alternative approach is pretty unappetising, especially in a small country with (typically) a pretty thin pool of talent.   Perhaps the US is big enough that it can comfortably turn over thousands of positions each time the President changes, and still mostly staff senior ranks with capable people.   We almost certainly can’t.  Or consider the unsightly spectacle of the US Supreme Court: all the nominees, from whichever party, seem highly capable, but no one on either side now views the Court as some impartial body, disinterestedly applying the law and constitution.  It has become largely an extension of ideological politics, but beyond the usual accountability mechanisms.  Fortunately, even in the United States, the central bank has been relatively immune from partisanship –  perhaps partly because of the self-restraint exercised by most incumbents, limiting the extent to which they stray off reservation in their speeches etc.

Our new Governor seems to understand none of this. Or if he does understand it, he seems to care not a fig about our system of government: there are ideological causes to fight, and institutional turf battles to win.  In the first month or two in office we saw him talking openly about all manner of things that were simply nothing to do with his current job –  sustainable agriculture, climate change, infrastructure financing, capital gains taxes (and both sides of the bank conduct issues –  neither of them being a prudential issue).  A charitable person might have seen these as rookie errors –  a new appointee revelling in the spotlight and not quite sure where the limits were.  In Orr’s case, he has been around long enough that that never seemed very likely, and it is now clear that the way he started is the way he means to go on.  In the process he is destroying the institutional capital built up around the Reserve Bank –  as surely, and perhaps more damagingly, than his predecessor did by other means.

And for all his (stated) enthusiasm for openness, transparency, “demystifying” the Reserve Bank, and cartoons to aid communications, the Governor has not given a single speech on any of his core responsibilities during his now four months in office.  The Bank’s website tells us none is scheduled either. Nothing on monetary policy, nothing on the state of the economy, nothing on governance of the institution, nothing on financial regulation, nothing on financial stability.  Just nothing.

That doesn’t stop him sounding off on all manner of other topics.  There have been two more examples just recently.

I don’t usually follow Tagata Pasifika, but a reader yesterday sent me link to an interview that outlet had recently done with the new Governor.  I guess the Governor isn’t responsible for the headlines (“The Cook Islander keeping our economy afloat”) but, whatever his background, one had thought of the Governor as a New Zealander (unlike, say, the British Secretary to the Treasury), and perhaps more importantly, the Reserve Bank doesn’t “keep our economy afloat”.

Much of the interview was fairly heartwarming innocuous stuff about that one strand of Orr’s ancestry that is from the Cook Islands.  But as it went on, it became more troubling.  Interviewed as Governor, from the Reserve Bank premises, he was offering his thoughts on what “we” (Pacific people in New Zealand) could do to overcome poor outcomes (incomes, home ownership etc).  There was strange rhetoric about how people had sought to divide and conquer them, and that everyone needed to “work together”.  Predictably (perhaps even appropriately given his role), there was no suggestion that (for example) low home ownership rates might be improved if only the government freed up land markets, but weirdly there was talk about subsidised loans (I think from within the community) to get into housing –  which might seem a little at odds with the Governor’s day job (where he wields regulatory powers to stop willing borrowers and willing lenders getting together to take on a housing mortgage).

Even that mightn’t have been too bothersome.  But as we got towards the end of the interview, the left-wing rhetoric was really unleashed.  We were, listeners were told, facing challenges of “societal sustainability”: we can’t have, so the Governor told us, haves and have nots and all expect to get along together.  In such a world, said the Governor, one group will be locked in, and the other group locked out.

It would make great – if largely empty –  election rhetoric from, say, the Green Party (Metiria Turei’s proxy now governs the Reserve Bank?).  But it has nothing, repeat nothing, to do with the job the Governor is paid to do, and in which capacity he was conducting this interview.   It wasn’t even backed by any suggestion of serious analysis, but I guess it sounded good at the time.  It is hardly the sort of stuff that is going to command general respect for the Governor in his important day job.

“Doing stuff” about climate change seems to be one of the Governor’s personal causes, nay crusades.  It was there in some of those earlier interviews I wrote about previously, but it was on full, and prepared, display a couple of weeks ago, when the Governor was a panellist at the launch of something called the Climate Leaders Coalition.    They advertise themselves as 60 CEOs whose businesses, in some sense or other, allegedly account for nearly 50 per cent of New Zealand’s emissions –  a claim which seems like a bit of stretch, since (for example) although Fonterra is part of it, the farmer shareholders (who actually own the cows) aren’t.   Buried a bit further down the website, we find that these firms actually account for 8 per cent of employment in New Zealand.   I found it hard to take the grouping very seriously –  it seemed to involve a great deal of virtue-signalling and keeping on side with the new government –  even before I looked down the list and found that the Wellington City Council zoo was a member.

I guess virtue-signalling, lobbying, and generally kowtowing is what CEOs have to do in the regulatory state.  Here is what all the hullabaloo was about

We take climate change seriously in our business:
*We measure our greenhouse gas emissions and publicly report on them
*We set a public emissions reduction target consistent with keeping within 2° of warming
*We work with our suppliers to reduce their greenhouse gas emissions

We believe the transition to a low emissions economy is an opportunity to improve New Zealand’s prosperity:
*We support the Paris Agreement & New Zealand’s commitment to it
*We support introduction of a climate commission and carbon budgets enshrined in law

All of which is pretty devoid of content or, arguably, demonstrably untrue.  The cause of a least-cost adjustment towards a lower-emissions economy –  economic efficiency – isn’t helped by every individual firm proposing some emissions reductions target that is somehow “consistent with” keeping within 2 degrees of warming –  one wants price signals and individual firms reacting based on the specifics of their own businesses and markets.  Some firms and industries might actually increase gross emissions, others might close down completely.  Then, of course, there is the claim that the transition to a low emissions economy is an opportunity to improve New Zealand’s prosperity: the government’s own consultative document suggests that a net-zero target by 2050 could come at a cost to GDP of 10-22 per cent, and no credible argument has been advanced as to how prosperity and productivity will be boosted by this big adverse shock (in a country still heavily reliant on animal emissions –  let alone international aviation emissions, not included in the official numbers.

In other words it was mostly feel-good stuff, worth some headlines on the day, but amounting to almost nothing.   It was self-interest on display (perhaps defensive self-interest, but self-interest nonetheless) –  which is fine; it is what businesses do, especially in face of looming regulatory constraints.

But what was the Governor of the Reserve Bank doing participating in this function, celebrating the event, cheering them on, all without adding a shred of economic analysis to the discussion?

You can watch the Governor’s part in the panel discussion (about an hour in at this link).  There was no sign from the Governor suggesting that he was participating simply in some sort of personal capacity – if that is even possible for high officials.  In fact, apparently rather the contrary: his speaking notes are available on the Reserve Bank website as his first and (so far) only gubernatorial speech.

Even the published text is like something from a crusade rally:

To see so many companies agree to the following is a moment of rejoice.


The best time to start this process is 30 years ago, or today. So I am privileged and proud to be a Kiwi sitting on this stage with so many New Zealand companies involved.

We are told that consumers will want “intergenerational justice” –  although I suspect most of the businesses present know that consumers typically want a decent product at a low price.

We are told that

Climate change, if not addressed, will create unforeseen social disruption and displacement.

I’m not sure how a public servant can state with such confidence that ‘unforeseen” things will in fact happen.

New Zealand can’t change the world. But, the world expects New Zealand to lead.
What do we have at risk?

Apparently almost nothing

We have less embedded costs and risks associated with making change (e.g., very limited fossil fuel production and dependency). We have least to lose and most to gain.


We can be a brand leader on climate change in the world given our starting point.

Surprisingly –  or perhaps not –  there is no mention of those animal emissions, and the absence as yet of economic ways of reducing emissions without eliminating the animals.  No mention of us having among the very highest per capita emissions in the advanced world, no mention of the importance of international shipping and aviation to the New Zealand economy, no mention of the policy-induced rapid population growth which drives hard against any other policy efforts to reduce emissions.  And, of course, no mention at all of the NZIER modelling featuring in the government’s own consultative document suggesting a very large real economic cost of adjustment, or of the Infometrics modelling featuring in the same document suggesting that the costs of adjustment will fall disproportionately on lower decile New Zealanders, and not very much at all on the highly paid like Mr Orr and the Climate Leaders Coalition members.

Orr never cites any evidence for his bizarre claim that the world expects New Zealand to lead in this area (in fact, given our size and different economic structure, it would be a sign of profound cynicism and unseriousness if “the world” actually did have such expectations.   But he does provide what he considers as evidence for why “we” can lead.

I have been fortunate to have witnessed great transformation in thinking and behaviours – such as the business commitment today – related to responsible investing.   My own experiences include involvement in:

  • The UN’s Carbon Disclosure Project (which the New Zealand Super Fund (NZSF) led and had pushed back at us by so many New Zealand businesses – there is no ‘I’ in denial);
  • Our leadership of the International Forum of Sovereign Wealth Funds (IFSWF) on responsible investing, and the ‘One-Planet’ initiative that the NZ Super Fund only last week promoted and signed;
  • The NZSF’s own courage in reducing their carbon exposure and engaging companies and searching for new alternative energy uses; and

In other words, not a single private sector entity, and no real economic adjustment (no actual reductions in emissions) just various different gatherings of government agencies around the world.  As for the claim that the NZSF portfolio reallocation took “courage” –  and isn’t it bad form to boast of your own “courage” anyway? – whose money was on the line?  It certainly wasn’t the Governor’s –  and as I’ve pointed out before the change was done in such a non-transparent way that we can’t even keep track of how much money this reallocation will have made (Orr’s claim had in any case been that it was hard-headed business decision, justified by expected risk/return considerations).

There is, in the published speaking notes, some rather strained attempt to connect the Reserve Bank’s financial stability role to the climate change discussion, but almost all of that was missing from the version he actually delivered, and none of it is compelling in the New Zealand context.  Perhaps there is some story to be told about dairy debt exposures, if emissions prices are pushed up too quickly undermining farm profitability and driving down rural land prices –  but there was none of that even hinted at in the Governor’s notes. I guess it would have disturbed the feel-good mood of the day.  It might have suggested an economic cost, rather than the nonsensical claims the Governor associated himself with about the opportunity to improve prosperity.

It was the sort of stuff you might expect at a Green Party rally –  although probably at least some of them might be more honest about the likely cost of the hairshirt.

And all that was just the Governor’s published text.  In his actual comments (viewable at the link above) we saw the schoolboy clownish side of the Governor on display, flippantly suggesting that the Bank wouldn’t raise the OCR until carbon had been reduced to zero.  I don’t suppose anyone took him remotely seriously –  a problem in itself, since Governors (like Presidents of the United States) really should be able to be taken seriously –  but it displayed none of the gravitas and seriousness one might hope for in the holder of such a high office.   That isn’t just me getting old and pompous: here was the relevant line from the Board’s advertisement for the position of Governor

Personal style will be consistent with the national importance and gravitas of the role.

And then we had this nonsense

“Let’s have our moment of glory, but we are lagging behing the world. And today we’re leap-frogging at least back to the frontier on one part of it,”

“Moment of glory” or “leap-frogging at least back to the frontier” from that lot of not very specific commitments, Wellington Zoo leading the way to save the world?

It went on.  We were told that “social cohesion would be truly truly challenged if we don’t do something about climate change” –  really, in New Zealand, which might just get a bit warmer and more pleasant?  The audience was warned of nation-state failures, thus presumably the imperative for New Zealand to “take the lead” – “we can do it, we should do it.  Lets do it”.   It must have felt very good in that meeting that morning.

At least until the Governor began to denounce capitalism.    Modern-day capitalism, the audience was told, drives you to short-termism.  No sense that it might have contributed mightily – including sparking innovation to deal with costs, problems, and opportunities that arise – to the unrivalled material prosperity the world – in almost every corner –  enjoys today.  No, capitalism is the problem.  That must have been a bit awkward for the assembled CEOs –  or at least for their owners –  but no one seemed to challenge the Governor on that.   Which was probably just as well, as the Governor didn’t seem to have anything to back up his claims.   Rereading his published speaking notes, it was striking that not once did he identify any problems, costs, risks, or failures in government interventions.   Wise governments, wise central banks, wise regulators will save us………

It isn’t as if this sort of rhetoric is new.    A month or two back the Governor was sounding off nearer to his own territory, claiming that financial markets (lenders, borrowers, and all) were myopic and therefore regulation was needed.  But when I asked for any research or analysis done by or for the Bank in support of this proposition, it turned out there was none.  It was just off the top of his head.  But it must have sounded good at the time.

Reflecting on all this, I have a number of concerns.  Perhaps the least of them is the lightweight nature of the Governor’s contribution, which too often sound more like campaign speeches than the considered thoughts of a serious senior public official.   If this is how he comments when we do see or hear him, what must things be like in private?  If this is the standard we now get from top public servants, what must the rest of government be like (all those CEOs we –  rightly –  never hear from)?

A good test is always whether one would have the same reaction if someone you are criticising was saying things you agreed with.  In this case, I can unambiguously say yes.  I’d be embarrassed to have such lightweight crusading perspectives from someone so senior for any cause I supported.  And it is simply inappropriate for the central bank Governor to be weighing in on such issues at all –  whether climate change policy, infrastructure. taxation policy, immigration policy, welfare reform, land supply or whatever.  It isn’t his job, and we need to be able to have confidence that the Governor has just one agenda –  doing his job –  not using his pulpit to champion personal agendas.  If the Governor wants to pursue those causes, he should set up a think-tank or run for Parliament.

I don’t suppose that Adrian Orr is setting out to advance the cause of any particular political party.  And no doubt the views he expresses –  flippantly and more seriously –  are all his own.  But he only gets away with it because he is mostly advancing causes the current government and its support parties happen to agree with.  Imagine the outrage if he were attacking –  especially in a similarly lightweight way –  causes dear to the heart of the government?  I’m not, of course, suggesting he should do so –  whatever private views he might have on such things, neither we nor the government should know them.  The Governor is paid well, and given enormous power, to do a quite specific job, and he needs to learn to stick to his knitting.

Idly, one might suggest that the Reserve Bank Board should do its job.  Not only did they lay down that requirement for gravitas, but they added this criterion

The successful candidate will also demonstrate an appreciation of the significance of the Bank’s independence and the behaviours required for ensuring long-term sustainability of that independence.

Sounding off loudly (and lightly) in support of all manner of contentious causes represents a real threat to the sustainability of effective independence.  If this behaviour is tolerated, only politically-acceptable lackeys need apply for the Governor’s role in future, and incumbent Governors are likely to find it quite difficult to work with a different colour of government.  Both would be most unfortunate outcomes.

As I say, one might idly hope that the Reserve Bank Board would do its job, and pull the Governor back into line.  Then again, when has the Board ever done that?  They seem to see their role as being to have the back of the Governor –  whoever he is, whatever he does –  added to a sense that the law itself doesn’t really apply to them.

I’m no fan of the Green Party. But at least they put themselves to the people and got elected. They face the electorate again in two years.  The Governor has no such mandate, no such legitimacy, for running Green Party like rhetoric from his well-paid public bully pulpit.


8 thoughts on “The Governor as a Green

  1. Well said! (Is there a “not” missing in this sentence? “And for all his (stated) enthusiasm for openness, transparency, “demystifying” the Reserve Bank, and cartoons to aid communications, the Governor has NOT?? given a single speech on any of his core responsibilities during his now four months in office.”


  2. Eeeks, cheerleading is one thing – misleading is another;

    “We have less embedded costs and risks associated with making change (e.g., very limited fossil fuel production and dependency). We have least to lose and most to gain.”

    Has he not read the economic analysis that went with the government’s recent consultation exercise?


  3. I am watching Peta Credlin discussing Australia and the Paris Agreement.
    Shame we don’t have such good debate over such issues in NZ and shame people like Orr don’t watch Credlin or read NZCPR or Jo Nova .
    Climate Change happens all the time but the current setup is a giant hoax.


    • Indeed, and as I’ve noted previously, that was not good for the Bank (either the way he canvassed openly some of his personal policy views while still Governor) or in the way he went straight from office into politics. Both left the Clark govt (reasonably enough) very suspicious of the Bank.


      • Everytime I think of Adrian Orr, I get a minds eye of Shane Jones and vice versa. Both seem to share similar characteristics. Political animals with a gift of the gab. Unfortunately they rely too much on that gift of the gab and rhetoric throughout their respective careers.


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