A couple of weeks ago the editor of Central Banking magazine (something of an house journal for central bankers, and for whom I’ve done book reviews for some years) invited me to write a fairly full article for a non-NZ audience on the extraordinary events of recent months. The request/invitation was for a piece along the following lines:
“The aim would be to provide readers with an insight into how a highly respected institution (internationally, too) ended up in a position where both its top two officials were forced to resign and (perhaps) what steps could to be taken to redress the matter and restore the RBNZ’s reputation for sound governance?”
Having been so caught up in the unfolding detail, writing something like that proved to be a useful discipline, trying to stand back just a little and tell a story.
I wrote the article in the couple of days before we left on holiday, answered the follow up questions, and then Central Banking published the final version on their website yesterday morning (there is a paywall but registration should provide access)
[Link deleted as no longer relevant – see below]
There are only trivial differences between draft below and the final version, mostly the addition [UPDATE: by Central Banking] of various references/footnotes to the published version.
[UPDATE: Both I and Central Banking magazine have received demands to retract and apologise for the article under threat of legal proceedings by Adrian Orr, who appears to have objected to aspects of how his time in office, as a senior public figure and Governor of the Reserve Bank of New Zealand, was characterised. Central Banking has for now removed the article (link above) for further review. I posted the article here initially mainly to help readers who had had difficulty getting free access to the original via registration on the Central Banking website. As I’m currently travelling and cannot easily modify the text to make clear and extensively document a few points I have chosen to delete the article here as well.]
[FURTHER UPDATE 1 Oct: I have now been advised that there has been a “confidential settlement” between Orr and Central Banking magazine’s owner, under which they have agreed to remove the article permanently. The following statement now appears on the Central Banking website.]
UPDATE 21 October
I have decided that I will not republish the text of the article I wrote for Central Banking here, even with amendments. The piece had been written for an overseas audience, and through the sort of lens the magazine had requested. There is copious material on my blog on the events of the last two years, pre and post Orr’s exit, and more snippets have emerged in recent weeks. I hope at some stage to produce a NZ-focused summary account and analysis of those events.
UPDATE: 24 November
Among Orr’s claims has been that in my opinion piece I had alleged that he had “bullied his staff”. I was surprised by this claim. Several weeks ago I asked my lawyers to communicate with his to make clear that I had not made any such claim (and had not intended to do so and did not intend to do so now) and expressed my regrets if Mr Orr had read the text in the way suggested.
croaking cassandra 
Another great piece Michael.
I feel – though you mention the previous government – you let off and did not include the fact that this all started with the previous Minster of Finance and that there are at least 4 high ranking persons we should examine and seek answers from in greater depth.
Add to that group the Treasury and their sordid part of “no action or grossly delayed reaction” around the important oversight role.
I want to thank you for your expertise which you demonstrate in this blog and the admirable persistence you verify through your tenacity.
Really well done.
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Hear, hear Nicholas! And I think Michael capped it with his quote from President Coolidge. In these modern times we seem to ignore the importance of good character,…indeed we are very cynical, although perhaps understandable given modern media’s focus on the news value of individual failure. But we seem to have an entirely unjustified faith in ever more laws.
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We had far, far superior domestic candidates on every level – vastly superior qualifications, international experience & domestic experience – who applied for Governor but who were shafted by Quigley before he resigned and Willis because of political “optics”. NZ under National is not a meritocracy. Liquid Luxon & student debater Willis have turned it into a zoo. To all Kiwi graduates, get out of the country, because you will not get promoted with these inbred clowns in charge. Wouldn’t recommend to any of my students to stay and put up with this circus.
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Normally, economists (which Quigley and Orr are) would be delighted to be referred to in an international economics journal, especially if it relates to their policy choices in their professional lives. Not on this occasion…
Amongst the many sins you detail here is that of Quigley and Orr spending large sums of taxpayer money that they were not authorised to spend. If true, that’s fraud in the plain English sense of the word. One has to wonder whether the Council of Waikato University thinks Quigley is still fit to be VC.
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It probably was not technically illegal but the huge 24/25 budget approved last June by the entire board, incl Orr and Quigley, was certainly well out of line with what everyone else – prob incl Grant Robertson- thought they were allowed to spend, and certainly unethical and out of step with the fiscal restraint being applied last year to almost all other NZ govt agencies.
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If I understand your analysis of this matter correctly, these actions were not merely taken in the knowledge that they would not have been authorised had authorisation been sought but, in pursuit of this scheme, they withheld from the Minister information that would have made their actions apparent to the Minister at an earlier stage.
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That is certainly what the papers suggest (tho note they apparently had a lawyer – anyone can find one – suggesting what they were doing was formally legal). Much blame also rests with Tsy and MOF who seem to have failed to ask hard questions and challenge Orr/quigley anything like earlier enough.
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Amazing how the incoming Swedish Governor, not even ten minutes into the NZ job, standing next to the vacuous Minister Willis, refers to “Russia’s illegal invasion of Ukraine”. Beggars belief. Her job is monetary policy, not foreign policy. Highly unprofessional, but that’s the circus Willis & Lux have turned NZ into.
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Missed that one. As you say, rather inappropriate.
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Very useful thanks Michael.
One point which could be added as a general lesson is that it is not just legislation which is alone insufficient to ensure policy resilience, but also the that political, social and economic culture and direction matters. The macro and micro policy climate in which the events described occurred was very different to the climate which prevailed at the time modern RB policy was introduced in the 1980s.
That earlier climate supported laser focussed policy, exclusive clearly defined roles and high levels of policy commitment amongst staff at most levels of the RB and generally across the economic agencies of govt.
Come the Labour era post 2016 or so that was not the case. Instead, there was palpable questioning of targets, softening around the exclusive nature of variables in policy targets and a much less driven commitment to purity in policy, adhering ruthlessly to areas of comparative advantage, wariness of side tracking and diversion from task and so on.
These factors may not have been determinative in respect of the events which unfolded but they created a much more permissive climate within which to err and stray.
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Finance Minister Willis is the person who should resign. Whatever my own differences of opinion over monetary policy with former Governor Orr, he always acted in line with his convictions. His integrity was impeccable. His contract was renewed with unanimous support of the Board & Minister of Finance. The subsequent Minister Willis renewed the contract of Board Chair Quigley. Then she turned against Orr.
My understanding is he became an obstacle to the Big Banks that want to squeeze ever more monopoly profits out of NZers. Orr was right to stand-up for his convictions on wanting high bank capital rules. I supported him on that – squarely backed by the likes of John Cochrane, the greatly respected Stanford / Chicago global intellectual authority on such matters. In terms of standing up to the oligarchs, Orr is a hero. Meanwhile Willis has given capitalism in NZ anl bad name by siding with the banks, ramming through retrospective legislation to attack the rights of their customers, conniving with big food, big gentailers, and representing the crown as majority boss of monopoly Air NZ.
No wonder this National Party has made Kiwis want to eat the rich with capital and asset taxes. Get out of office, Willis.
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