A couple of nights ago, shortly after the Minister and Treasury finally released the suite of texts between Willis and Rennie, ZB featured interviewer Heather du Plessis-Allan talking to Herald journalist Jenee Tibshraeny (who has been over the Orr/Quigley/Willis saga issue from day one). There wasn’t anything concrete that was new in the conversation but it was the ending that struck me.
Tibshraeny: In this instance I’m disappointed by the lot of them. I can’t even distinguish who is most culpable and feel like as a member of the public I’ve been misled and it is disappointing.
Du Plessis-Allan: It just looks like a giant cover-up doesn’t it?
Neither of them seem like zealots, let alone anti-government zealots with an agenda. So what a sad state of affairs we’ve come to in this country.
But the Minister has clearly found herself some supporters in The Post (their journalists have also been a bit sympathetic to Orr) with an article this morning where they claim – it must have been music to Willis’s ear – that “overall, Willis appears to have helped rather than hindered the fuller facts going on record while not at any point seeming to defend the Reserve Bank’s own miscommunications”. Which would be an extraordinary claim anyway, but it was belied by the fact that a few paragraphs earlier they had reminded readers that on 5 March, after the deeply problematic Quigley press conference, Willis told The Post journalists that she was satisfied with the explanation Quigley had given for the Governor’s departure. And, of course, none of the explanations given that day (and there were several, mostly designed to have us accept something like “inflation is in the target range, time to do something different, nothing to see here”) were at all convincing, and the Minister – who had urged Quigley to do the press conference – knew that the public had been actively misled then. And if perhaps she coulddn’t predict quite how badly Quigley was going to do when she got him to go out there, there is no sign – not the slightest – that she either expected or wanted him to tell the truth. And, of course, over the subsequent months she did occasionally wring her hands in public, regretting eventually that the Bank wasn’t being a bit more open. But…..she is the Minister of Finance, with knowledge and leverage, not “helpless mother from Karori” putting her thoughts in Letters to the Editor of The Post. She could have acted, she chose not to do so, and if it hadn’t been for the Ombudsman we might still have been dealing with official denial and avoidance, enabled by her. That she enabled the obstruction and coverup for months is nicely captured in this exchange with Heather du Plessis-Allan just six weeks or so ago.
Of course as I noted last Friday there are still material unanswered questions about how the choices – big picture and detailed – of communication of the Governor’s departure (and supportive messaging etc) came together. Statements of that sort don’t emerge in half an hour, and there were material choices to be made. It is hard to believe that no one in the Minister’s office had any involvement, or that they and the Minister were not actively thinking through the issues and risks and options pretty much from the time the Minister got that text from Rennie on the evening of 27 Feb suggesting things would now come to a head fairly quickly. I’ve lodged one more OIA on those matters this morning.
And then of course there is the Reserve Bank itself. The temporary Governor turned up yesterday to speak at the Financial Services Council and began this way
I suppose we should give him a little credit for even mentioning the “test of trust and confidence in us as an organisation”, except that….having giving it a passing mention he went on to talk about inflation.
There are still serious questions for all those involved at the top level of the Bank (temporary Governor, board members, key communications staff etc). Rather than write it all again here is a paragraph from last Friday
I’ve also lodged an OIA on those issues those issues this morning. But the wider questions for the Board become even more pointed now that we know they were so intent on getting Orr out that they were likely to recommend the Minister to dismiss him just a few days after their formal process had begun (predetermination and all that?). And yet they still apparently thought it just fine to deceive the public – approving Quigley’s actions presumably – and to go on doing so for months. People of integrity would resign at this point.
Late yesterday after my short post with former Deputy Governor Peter Nicholl’s article on the Reserve Bank shambles (and specifically the governance failures), Auckland university professor of economics Robert MacCulloch left this comment
Taking his point about the questionable legitimacy of the Quigley-led (and rest of Board) process for selecting a nominee, I’m not sure I’d go quite as far as he does. Time is moving on, and there is a pressing need to have permanent new management in place. On the other hand, quality really matters. So my stance is probably that the Minister (and the wider Cabinet) need to ask themselves very seriously whether any nominee they have settled on really reaches the standard needed now: a first rate independent highly credible person of gravitas, management capability, and some intellectual stature. If they have, well and good. If not, then there would be a case to reopen the process (preferably after sorting out the board members themselves). Rumour hath it (well, a journalist told me) that the nomination has already gone out to the other political parties for consultation. Here the role of Barbara Edmonds becomes really quite important. If she can really be persuaded that a nominee is not just “any warm body, because the job needs filling” but a serious credible and respected figure, then that could be quite persuasive (and recall that the legislative provision Labour introduced requiring consultation with other parties was presumably done in the spirit of the notion that a person appointed as Governor really should command at least grudging respect across the spectrum). But if Edmonds isn’t convinced – and the situation has deteriorated further in the last couple of weeks – she and her leader need to be willing to take Willis aside and say so.
And finally for now on this issue, this is the closing paragraph of a piece I wrote earlier this week on the whole grim saga.
And is that for a while. My wife are heading off on a month’s holiday tonight so it will be at least a month before there is anything more from me here. By then, one hopes, there might have been announcements of strong credible independent people to take up the two key roles, Governor and board chair (and, actually, a new MPC member too). Perhaps some new commitments to greater monetary policy transparency too, along the lines Kelly Eckhold at Westpac suggested last week. But we’ll see.
And that means that among the various other things I just never got to in recent weeks was making a submission and a substantive post on the Reserve Bank’s consultation on the capital requirements review that the Minister prompted them to initiate once Orr had gone. As it happens, I don’t have much problem with what they are proposing, and I really strongly welcome the fact that the interim guard (Hawkesby/Quigley) did go to the effort of commissioning a decent external consultant to review bank capital levels in New Zealand and those in a bunch of other somewhat comparable advanced economies (a measurement exercise rather than a policy one). Orr refused to commission anything of the sort when he was still unilaterally in charge in 2019. This was the conclusion of that new report.
My own issue with the entire framework – 2019 (eg here and here) and now – is that it is built on assumptions about the (GDP) cost of banking crises (themselves, the bits able to be ameliorated by capital buffers) that bare no relationship to reality in advanced economies, no matter many decades one looks back. The Bank now justifies sticking with this assumption – which is crucial to any serious cost-benefit analysis – on the grounds that it is “internationally conventional” in such work. No doubt “Internationally conventional” provides a safe harbour for bureaucrats, but it is no substitute for serious thought and critical review.
It is arguable that this unsafe assumption may not matter unduly at present, if market demands (shareholders, bondholders) mean that banks would choose to hold quite high capital ratios even if regulatory requirements were set lower. And of course – another thing not mentioned in the consultation – is that for our largest banks it would be APRA rules that would still be binding even if the Reserve Bank were to adopt an even less demanding model. But we really should be able to expect a higher standard of analysis – including such basics as the ability to distinguish the costs of misallocating credit and real investment in the preceding boom from those narrowly from actual bank failures or near-failures themselves – from our financial stability and bank regulatory agency.
Yes, Orr/Quigley/Willis again. For everyone’s sake now – well, perhaps except her own – one can only wish that the Minister of Finance would finally decide, more than six months on, to make a full and complete disclosure of what actually went on around the exit of Orr and the aftermath.
Instead, the snippet by painful snippet process continues. Since my post yesterday we’ve learned some more things:
First, questioned by Barbara Edmonds in the House yesterday, the Minister finally gave the gist of texts between her and Iain Rennie on 27 Feb re the commencement by the Bank’s Board of an “employment process”. She and Treasury have withheld these texts for many months, long after she herself was the first to formally disclose (to FEC on 18 June) that there had indeed been an “employment process” prior to Orr’s departure. That in turn lead her to realise – what she’d have known if only she were an assiduous reader of this blog! – that in fact on 18 June she had also told FEC, three times with Rennie sitting next to her, that she’d first heard from him about the “employment process” on 24 February. Last night just before the House rose she made a personal statement correcting this point. No doubt it was an honest, if careless, mistake in June, although it doesn’t reflect very well that there was no earlier correction (when Rennie must have known, or suspected and should have quickly checked afterward, that his minister has mis-spoken).
Second, and much more importantly, just prior to 2 this afternoon Treasury finally released the set of texts in full. There are a couple about the funding agreement stance from 14 Feb, which are useful but don’t materially add to the information we already have (although do make clear that Rennie had only spoken to Quigley about the funding agreement bid on the morning of the special 14 Feb board meeting). There is a mysterious one from Willis to Rennie on 17 Feb “Are you coming to the 230”, which has no obvious significance but Treasury must think it is somehow in scope. And then there are the crucial 27 Feb texts.
The first of those adds nothing new, but the second does (going beyond what Willis told the House yesterday). Note that fourth sentence: “Neil’s current thinking is that you could receive recommendation later next week unless decision is taken to go down voluntary exit route”. In context – and given the range of the Minister’s power – this could only be a possible recommendation to dismiss. So not only did the Board envisage their process culminating in a dismissal recommendation (NB an interesting pre-judgement before hearing Orr’s response), but the Minister was fully informed of that (and actually tossed in the observation that the board would need good legal advice, apparently approving of the lawyer Rennie advised her the board was using. (Incidentally, she would also have needed good legal advice had it come to a recommendation to dismiss, given that any decision could have been challenged in the courts). This completely undercuts the line Willis herself has run for months about how it was all nothing to do with her because it was an “employment process” when, as I’ve stressed and the Board, she, and the Treasury clearly knew, she was the one with the (hiring and) firing powers, and only her.
The third development was a question to Willis from Edmonds in the House this afternoon. She asked whether the Minister considered that Quigley’s characterisation of the exit from 5 March (and beyond) as “a personal decision” was misleading. The Minister said that she had relied on Quigley’s judgement that that was all that he could say. Edmonds could have strengthened the question, because Quigley also said on the day that “the Governor had got inflation into the target range and felt it was time to go” and denied that there were any conduct, policy, or performance disputes at the heart of the exit. The Minister is just making up stuff if she believes that any of those lines were really satisfactory, unless “satisfactory” involved keeping the substantive truth from the public. We still do not know – and MoF claims not to either – what NDA provisions there actually were, and nor do we know why the Minister (operating in the public interest supposedly) did not insist on (a) finding out in advance, and b) tightly constraining them so that the public was not misled.
Edmonds moved on to ask why the Minister also didn’t correct the record on/after 11 June (the Bank’s deeply misleading selective release and statement, which tried actively to avoid suggesting there had been any employment issues – even though it was implicit in the existence of an exit agreement). The Minister responded that she had not been aware of the Board’s specific concerns, or of Orr’s responses, or of the terms of the exit, she did not want to expose taxpayers to legal risk, and (supposedly highmindedly) did not “want to politicise a sensitive employment process”). None of this really stacks up. As it is, on 18 June, at FEC (but barely if at all reported at the time – I hadn’t noticed it) she noted, what Quigley had sought to obscure, that there had in fact been an “employment process”, and of all the answers she didn’t have she could – and probably should – have insisted on them. She was aware the Board was driving the Governor out but had no idea what the concerns were? Yeah right. And, of course, decisions around funding, and decisions to fire the Governor were – by Parliament’s design – ones made by politicians. Willis concluded that she had relied on Quigley and he should have done better. Well, of course, but he was her man, and she covered for his approach for months, deceiving the public in the process.
On the final question, Edmonds asked if (rhetorically no doubt) if Willis really believed New Zealanders could trust her when she had withheld information, had known she might receive a recommendation to dismiss etc and (with a final flourish) when it fact it was Willis who had driven Orr out. Willis attempted (rather laughably) the high road, suggesting that Edmonds was free to be the great defender if Orr if she wished, but as for her (Willis) she wouldn’t deign to “politicise” Orr’s exit.
And those were the new developments.
But there are so many questions still outstanding. For the Board, at what point did they engage external counsel to advise on a process that (it is finally clear) they envisaged leading to an unprecedented recommendation to dismiss the central bank Governor? And was this prompted mainly by Orr’s behaviour at the 20th and 24th meetings or had it been brewing even before that? Also for the Board, given that clear direction, how can any of them with any integrity remain in office having been collectively responsible for the 11 June release, which was now even more clearly deliberately deceptive (under a guise of pseudo-transparency).
As for the Minister (and Treasury) it remains inconceivable that we have had the whole story. You, as senior minister, don’t just get a text out of the blue suggesting the part-time (mostly Labour appointed) board might recommend firing the Governor without wanting to know more, unless of course you already knew more. It is beyond belief that there were no discussions after Orr’s walkout from the 24 Feb meeting, and not very likely that – given that Rennie was being used as the comms intermediary (why?) – that no one at Treasury was looking into legal processes, grounds etc.
And, of course, why did she take no steps to ensure that a reasonably honest (not necessarily full or complete) statement was given to New Zealanders on a) 5 March, b) 11 June or c) at any other time up to and including the Ombudsman determination a couple of weeks ago? Whose interests was she serving then? Was her stance more about distancing herself from a process than legitimate legal/privacy issues for Orr?
Someone who doesn’t follow these things much commented to me recently “how can anyone now trust anything the Reserve Bank says?” A good question, but as information continues to seep out from Willis, much the same might, unfortunately, be asked about her. I remain convinced the ousting Orr was well-warranted and welcome, to her credit given the opening Orr’s behaviour created. But not the cover-up, the active misleading, and the obstruction. Or the lack of full disclosure to this day.
It isn’t impossible that you, readers, are getting tired of the still-unfolding Orr/Quigley/Willis saga. You wouldn’t be alone in that. I have many more intrinsically interesting things to do (spent yesterday writing a review of new academic history of US banking supervision from 1798 to 1980, and am reading a history of little-known sovereign borrowing scandal from the early 19th century) but…..we are still short on answers and on accountability, notably from the Minister of Finance, who may have authorised but certainly enabled the systematic efforts led by Neil Quigley to mislead New Zealanders for months as to what went on. At any point, from and including 5 March (the day Orr’s resignation was announced) she could have a) insisted and b) personally ensured that the truth came out. She didn’t and still hasn’t given us a complete and straight story, or expressed any contrition for anything she was party to in the last six months. Deliberate efforts by, and enabled by, a senior minister to mislead New Zealanders would once, and once brought to light, have been treated as a very serious offence (but then, as I noted here repeatedly, MPs never seemed very bothered when Orr made a mockery of their place in the system and actively misled – or worse – them repeatedly). The rot runs quite deep.
Yesterday saw another OIA response from the Reserve Bank dribble in, and with it one more snippet of information. It exposed, once again, my tendency to look for the least-worst explanation, which has been quite unhelpful in making sense of the mess of recent months.
A couple of weeks ago, the Reserve Bank released to me a Letter of Expectations that the Minister of Finance had sent to the chair of the Bank’s board (Quigley) last year, outlining how the Minister expected that the Board would approach bidding for and negotiations on the next (2025-30) Funding Agreement. The Reserve Bank has a website page where it publishes ministerial letters of expectations. They simply never published this particular letter of expectation on that page, or on the website page gathering together material on the 2025-30 Funding Agreement. Par for the course you might reasonably think, given how obstructive and then slow and partial the Bank has been.
As I noted in that post a couple of weeks ago, the Funding Agreement letter of expectation had made it clear that the Minister was looking for cuts. This was the relevant snippet.
But the version of the letter the Bank was released was undated. The Bank had been quite open about the general 2024 Letter of Expectation, which was dated 3 April 2024. It was fine, but fairly general, noting that further detail relating to the next funding agreement would be coming “in due course”.
I guess I had in mind that perhaps that letter hadn’t been written until much later. After all, the existing Funding Agreement didn’t expire until 30 June 2025 (and when Treasury actually got the Bank’s bid in September 2024, the papers suggest they did nothing with it for months anyway, considering it mainly in the context of this year’s wider government budget)
But what the Bank disclosed to me yesterday was that the funding agreement letter of expectation had also been received by the board chair on 3 April 2024.
And that matters because it was well before the Reserve Bank board made final decisions about the Bank’s 2024/25 budget. Quite possibly, the Governor was already encouraging the Board to agree to a grand spend-up in 2024/25 anyway – on the dubiously legal, but morally outrageous, basis that their total spending over the five years of the 2020-25 Funding Agreement would still be under the total allowed spending in that term (even though a) the agreement and Act specifically referred to individual year limits, b) the limits for each of the last two years had been reset by Grant Robertson just before the 2023 election, and c) there was a wider climate of spending restraint being driven by the Minister of Finance). Perhaps he already planned that such a spend-up would lock in a level of spending/staffing that might make it hard for the Minister to cut much when the new Funding Agreement was finally determined.
But, on 3 April 2024, he had the Minister’s own words for an interpretation that a Funding Agreement bid would be okay if it involved a 7.5 per cent cut relative to the Bank’s budget for 24/25. Wherever that budget happened to be set, apparently. Talk about dangerous incentives….in a system where the Bank sets its own budget, not directly constrained by (eg) parliamentary appropriations…..and the board signed up to this and went along, setting a budget for 24/25 about 23 per cent above what the Robertson Funding Agreement variation had allowed for that year, and then pitching a new Funding Agreement bid just 7.5 per cent below that level (and far above what even Grant Robertson had approved for 24/25). It was a try-on that really amounted to spitting in the face of the Minister, operating in total disregard to the times (let alone to the wellbeing of the staff, if the double or quits gamble went wrong, as eventually it did).
It is breathtaking all round. The Governor and Board attempted to drive a cart and horses through dangerously loose wording. Neither the Treasury nor the Minister of Finance seem to have had the measure of the people they were dealing with, and both were so asleep at the wheel that (a) when the Bank came back with a draft Statement of Performance Expectations in late April 2024 that deliberately left the budget numbers blank, neither followed this up and insisted on straight answers, and b) when the inflated Funding Agreement bid came in a few months later they sat on it for months and did nothing. No one was dismissed, no one was even severely wrapped over the knuckles. A senior political journalist told me last week that in an interview on 30 October the Minister had, unprompted, indicated that she was going to cut Reserve Bank spending……but she’d done absolutely nothing as the board had run rampant for months, including staff numbers still growing markedly. It wouldn’t be until mid-February that things would finally come to a head. As any parent knows the time to deal with bad behaviour is firmly and early, not leaving the offender with the implicit message that Mum and Dad don’t care too much, only to make a fuss belatedly.
Realising that this Funding Agreement letter of expectation had been received as early as 3 April prompted me to dig out the published minutes of Board meetings from the March and June quarter of last year (from which we are told nothing has been withheld) and the Board chair’s response to the (general) 2024 Letter of Expectations (for some mysterious reason known as the Strategic Issues Letter).
Rereading those documents in the light of what we now know, it is interesting how early both the Bank and Treasury had started work on the next Funding Agreement issues (the February 2024 minutes record that a very senior Treasury official – deputy secretary Leilani Frew, now departed – had been named as relationship manager for the funding agrement process, and the board had approved a memo to Treasury “to establish and agree foundational interpretations relating to the funding agreement and the principles underlying our approach to setting our baseline expenditure forecast”). The May Board minutes record Frew and the macro deputy secretary visiting the board and noted that ‘the work towards the next funding agreement, noting that there has been constructive engagement between RBNZ and Treasury an that baseline savings are in the process of being identified” (but presumably neither Frew nor Board, nor their staff, asked the questions that would have revealed the spending spree the Bank was just about to go on with the draft 24/25 budget – the immediately previous item on the Board’s agenda).
You might have supposed that having (a) had two letters of expectation from the (new) Minister of Finance on 3 April, and b) having a deadline to submit to the (new) Minister of Finance, just about to bring down her first government budget in straitened fiscal times, for consultation/comment a draft Statement of Performance Expectations (including budget numbers) by the end of April, that these sets of documents would be the subject of serious discussion by the Board at its April meeting.
But the Board didn’t meet in April 2024 at all. Now, the March minutes record that there was an (unminuted) “workshop” on 23 April “to discuss the next iteration” of the Statement of Performance Expectations and Statement of Intent Refresh, but those minutes also just delegated to the Governor and chair the authority to sign out to MoF for consultation the draft SPE at the end of April. As it happens, the document was signed out by neither, but by one of Orr’s many deputies. Was the Board aware they weren’t planning to tell the Minister about the planned size of the 24/25 Budget? We don’t know, and the (published records) conveniently don’t show. Did they engage with the two letters of expectation then? We don’t know.
But it seems unlikely, because even if it came up at the 23 April workshop, Quigley had already sent his Strategic Issues Letter back to the Minister on 19 April, purporting to respond to both letters.
Note that he avoided the specifics from the Minister’s letter on the next Funding Agreement and gave only the vaguest indication of a more general approach (“we will consider and respond to”). Surely Treasury (Frew) and the Minister and her advisers should have been put on notice when they got such a vague response? But apparently not, given that they raised no questions/concerns when the budget numbers weren’t included when the draft Statement of Performance Expectations was sent in 10 days later?
There is no suggestion in any of the June quarter minutes from 2024 that the Board ever discussed the Letters of Expectations or thought hard about the implications, or the environment against which they were written. The May minutes do mention the Strategic Issues Letter but only “The Board noted the Strategic Issues Letter”. They seem to have been out on another planet, perhaps led by the nose by Orr, but with no one – Board, Treasury, Minister – providing the sustained vigilance (protecting the public interest and public purse) that was needed. The only Board questions noted in the minutes were looking for assurance that the 24/25 budget was going to be legal – and perhaps Orr’s tame in-house provided some such dubious assurance, as lawyers (in-house and external) are so ready to do for clients – but with not even a hint of a question as to whether such a Funding Agreement blowing budget was right or responsible or was likely to prove sustainable, no stress testing (for example) of what the implications (for people and for the organisation) might be if they did later hit a wall.
It really astonishing (or perhaps not; this is modern NZ) how little serious accountability there is in New Zealand public life. Of course, Orr has gone, but not because of anything he was doing mid-late last year, and Quigley eventually went too – again not because of what he led and did last year but because eventually the post-Orr coverup got a bit embarrassing. I guess too that the relevant Treasury Deputy Secretary has moved on, although there is no hint of that having anything to with being asleep at the (leadership) wheel when the egregious foundations were being laid for the Feb/Mar blowup this year. No board member has been dismissed, or as we understand it even reprimanded, and one was even reappointed this year. The board deputy chair – fully party to last year’s decisions – is holding the fort post-Quigley.
And then there is the Minister of Finance. By far her worst offence was enabling the deliberate deception of New Zealanders for months, when she could have cleared things up at any time she choice (Quigley may have become a nuisance to her, but he was her man, she empowered and enabled him). She still hasn’t been fully straight with New Zealanders. But her role last year – both directly, and in insisting on a more active engaged performance from Treasury – looks pretty culpable. Perhaps if she’d taken a stronger stance from when she first took office, Orr and Quigley would have been reined in much earlier, and the chaos and dishonesty of this year – and damage to her own standing (and the disruption of staff lives) – might have been avoided (many of us were probably glad to see Orr gone in the abstract, but…..no one wanted this).
Remarkably, one other snippet in the May 2024 board minutes is a brief note “the Board discussed the chair’s first meeting with the Minister of Finance”. The government had been sworn in on 27 November 2023, the Minister had been on record with her concerns about Orr personally, and Bank bloat, she’d even promised an independent review of monetary policy. She knew the Funding Agreement had a year to run, but was insisting on immediate cuts elsewhere. It was hardly a quiet and easy corner of her domains and yet she seems not to have bothered meeting with the board chair – her agent, and board wielded the power on prudential policy, where she also had concerns – for months after taking office. You can only shake your head and wonder what she was thinking, and why she made so little effort for so long to use the tools – formal and informal – at her disposal.
I think my post yesterday made a pretty conclusive case that the Minister of Finance had been fully part of the choice to deliberately mislead New Zealanders about what went on with the resignation of Adrian Orr. It might, initially, have been a fairly passive involvement re the proposed comms lines – when she, as responsible minister, should have been taking the lead in the run-up to 5 March, not leaving things to Quigley and the post-Orr Bank management (who, to put it mildly, do not have a strong track record on openness and accountability, or much sense of the likely public and political interest and risks). But she and her office quickly became fully part of it – prevailing on Quigley to do a press conference, knowing that it was exceptionally unlikely he was going to tell the truth, never challenging his statements before they went out, and signalling to the media afterwards that she was comfortable that a sufficient explanation had been offered. And then for months, even as it appears she gradually realised the coverup wasn’t going to prove tenable and offered occasional rebukes of Quigley, she continued to defer to the Bank/Quigley and used none of the knowledge or leverage that she had to force a more truthful set of disclosures. When finally Quigley was tossed overboard on Friday, it was only in the wake of fresh public furore about stuff she’d known of all along, and even then her press release just (so she says) recycled Quigley’s excuses for going – “the good job, well done, time to move on” stuff, Quigley had for a long time tried to deceive us with about Orr. Yes, she got more honest in her radio interview shortly after, which was better than nothing but not a great deal.
All in all, it should be quite unacceptable behaviour from a very senior minister. And even at this late stage there is no contrition, no sense that she might ever have done anything better or different. In face of the pretty clear set of facts it is both unconvincing, and leaves her looking weak (prisoner of Quigley gone rogue, sort of thing).
When I wrote that post yesterday I hadn’t heard the interview/exchange on Radio New Zealand earlier that morning (audio here, article here). Willis was no more convincing than in any of her other defences (eg as reported by the Herald, in an article linked to in yesterday’s post). She knew, she actively deferred to the Board chair for months, and at any time she could have insisted on more truthful explanations (even if the RB persisted in its own obstructive OIA responses). But I wanted to touch just briefly on a line she used in that interview yesterday, where she claimed that the independence of the central bank needed to be respected, and it would have been quite inappropriate for her to be involved in anything around Orr’s exit.
The Minister knows very well that the Reserve Bank legislation is carefully designed to distinguish matters over which the Bank has policy-setting responsibilities (eg many areas of prudential policy, such as bank capital requirements), where the Minister sets the goal but the Bank has operational autonomy (around monetary policy: the Minister sets the inflation target, the MPC adjusts the OCR to (aim to) deliver inflation near target), and where the Minister has primary responsibility. The old mantra was that Act was designed to balance operational autonomy with accountability, and to delineate carefully where it was that ministerial powers and responsibilities should be, and needed to be, exercised. One can debate the structure of the Act – I do, in a number of respects – but it is the law, and the Minister voted for the current legislation when it went through the House in 2021.
No one, but no one, seriously suggests that the issues that prompted Orr’s departure (announced on 5 March) had anything at all to do with the conduct of monetary policy (where it is important for the Minister and Prime Minister to keep their distance, not offering OCR advice in private meetings). As far as we know – and the Minister says she hasn’t seen the letter of complaint – the issues the Board sought responses on related to Orr’s personal conduct, and issues around trust in the context of a breakdown over Funding Agreement negotiations. There has never been a hint that monetary policy decisions were in the mix.
And the Act is quite clear that hiring and firing a Governor is finally a matter for the Minister (and Cabinet). The Board has roles in some of that – the Minister can only appoint as Governor a person the Board nominates (she is not bound though to accept any specific nominee), and the board can offer thoughts on whether the Governor’s performance or conduct rises to dismissal level, but even there the Minister (and only the Minister) can act to remove the Governor without a recommendation from the Board. Orr’s resignation was, as the law requires, submitted to the Minister, just cc’ed to the Board. So the repeated claim from the Minister that it was really important that she had nothing to do with any of it (was just a passive bystander, updated only when necessary) does not stand a moment’s scrutiny. Not only did the law give her a perfectly valid role, but so – frankly – did commonsense. In Opposition she’d objected to some of board appointees Robertson had made, who were mostly still there in February 2025. She knew that Quigley’s public handling of some past Bank issues had been questionable (to put it charitably). Wouldn’t any sensible senior minister, informed (say) on Friday 28 February that it was now all but certain that the Governor was going, after “employment discussions” initiated by the Board, have been all over the proposed communications lines? She might not have wanted her hands, or those of her office, to be too visible, but to sit idly by while the Bank (and Orr) dreamed up comms line – which would inevitably face robust external scrutiny – was to (voluntarily) make herself a hostage to fortune. That would be both risky and inept.
But the real point of this post wasn’t to repeat ground from yesterday. Instead, I want to put the Minister’s highly questionable part in the events of the last few months in the context of her overall handling of Reserve Bank issues since her days in Opposition.
Anyone who watched FEC hearings prior to the election could detect the frosty (at best) relationship between Orr and Willis. At times she did ask searching questions, and Orr did not like that, and tended to treat her – as so many of those who challenged or criticised him – dismissively. But there was never much follow through from Willis.
National opposed Orr’s reappointment, when (as the new law required) the other parties in Parliament were consulted. It was good that she did, but her central argument was half-baked (at best) and thus undercut the thrust of what could have made it hard for Robertson to proceed.
The point in the first sentence of that clip from her letter was quite right – and one hopes she bears that approach in mind with the appointment to be made shortly – but she’d already undercut the case with the half-baked “it’s election year argument”. People like me, who agreed with the bottom line (it really was dreadful that Orr was reappointing, leading us to this year’s mess), had to distance themselves from such an ineptly made case.
In Opposition she made much of the need for a strong independent inquiry into monetary policy during the Covid period (pushing back against the adequacy of the Bank’s own rather self-congratulatory and premature review of the MPC). One could debate how useful it might be, but it was a strong commitment, but nothing happened. (Curiously, in the March 2025 Board minutes there is this
and yet still nothing has been seen or heard.)
They made quite a bit about the staff bloat and loss of focus in Opposition, but then what?
Even in Opposition, there was no follow-up when Quigley was caught out actively misleading the Treasury, which in turn prompted them and Robertson to mislead the public in (about the infamous ban on experts serving on the first MPC).
It was pretty clear when National was in Opposition that they’d have preferred to be rid of Orr if they could. I pointed out back then (in a post prompted by a conversation with an interested party) that he couldn’t just be removed, but that there were quite a few things that could be done to put pressure on, to encourage early change, to improve how the MPC worked, and perhaps even to prompt Orr to think it really wasn’t an environment he wanted to stay on in). Almost none of it was done.
Quigley’s term as chair expired on 30 June last year. He’d covered for Orr for years, he’d led the board that recommended the reappointment, he’d been responsible for the blackball (and the lies), and he’d been chair since 2016. It was no-brainer to replace him, and would have been entirely uncontroversial, but she didn’t. She didn’t even keep the board fully manned (she was stuck with the Labour appointees until their terms ended, but you have to use the leverage and opportunities you have).
She did nothing to overhaul the charter for the Monetary Policy Committee, to encourage greater openness and accountability, or an expectation that members would be available for speeches/interviews. She seems to have done nothing more generally to encourage scrutiny and openness – it is now almost 11 months since the Governor or any second tier Bank person gave an on-the-record speech (extraordinary by modern central banking standards).
And if she did appoint two new MPC external members when the terms of the two 2019 originals finally ended, and the new ones appear to have been an improvement…..but we can’t really tell because we hear nothing of or from them. And then, again for reasons that escape understanding, she extended for one last six month period the last and elderly external MPC member from 2019 who’d been there through all the policy mistakes and communications lurches of recent years (that position now needs to be filled in the next few weeks).
We might also give her some credit for this year appointing a bit more economic expertise to the Board, although both appointees seem stronger on macroeconomics, which the Board isn’t directly responsible for, than on the regulatory side of things which the Board has direct responsibility for.
And what about the organisational/management side of things? Given the Minister’s evident unease about Orr, and her (quite appropriate) Opposition concerns about use of resources, you’d have thought that on coming into office she’d all over this (herself, and on her behalf her office and The Treasury) making life much less comfortable for the Bank from day one, even if (as was the case) they had a generous Funding Agreement running through to 30 June 2025.
Instead what we got was little and feeble for far too long.
Take last year’s Letter of Expectation to the Board (dated 3 April) These documents can’t compel agencies to do anything in particular, but wise boards are sensitive to the emerging expectations and priorities of ministers. There is six pages of the letter but nowhere does the Minister hone in on the very rapid increase in spending and staff numbers and signal a need for cutbacks. There is just woolly generic stuff
This was written in the run-up to last year’s government budget. Most departments were facing cuts immediately, and one other independent agency – ACC – while not directly controlled by ministers decided that, reading the times, they’d make savings anyway. It wasn’t even suggested to the Bank. And although there was a reference to the future
which should have been enough for a Board attuned to the times, it was pretty thin gruel and there is no sign the Minister ever sought to use the moral authority of her office, her bully pulpit.
The Bank doesn’t include the specific Letter of Expectation they got a bit later on the next Funding Agreement with the other documents on that deal, but it is here. I pointed out last week that, reasonable as it seemed, it contained a rookie error
talking in terms of savings relative to the Bank’s 24/25 budget, rather than savings relative to the Funding Agreement limits for 24/25. And even then, you might have hoped that in an agreement reached only every five years, in an institution that the Minister knew had lost focus and discipline, you might want a zero-based case for spending rather than just trimming the last level your predecessor happened to approve.
But, of course, it was all worse than that. The Bank actually set a budget that was about 23 per cent in excess of the Funding Agreement limits for 24/25 – fully and unanimously endorsed by the board – and when they had to consult the Minister on the Statement of Performance Expectations for 24/25 they simply left out the numbers. They didn’t tell the Minister what they were planning to spend. And neither she nor Treasury insisted on finding out. It isn’t clear when they finally realised, but it looks like not until very late last year at the earliest. And even when they did there is no sign of any consequences for anyone. There is no robust letter from the Minister rebuking the Bank for such egregious excess (and even if the Bank has a KC who claims – as lawyers do for their clients – that it wasn’t strictly illegal, it was entirely out of step with the thrust of government policy, and the times), the board chair wasn’t sacked, and no board members were removed (another of them was actually reappointed this year).
And then of course there was the egregious Funding Agreement bid approved by the board (unanimously) in late August and lodged with Treasury in September 2024. In a sane and serious world, Treasury would have opened the document, realised the gamesmanship that was afoot (at taxpayers’ expense) – this was trying to set a base for the next five years using the bloated 24/25 budget as base, not the previous Funding Agreement limits – and a) sent it back immediately, with clear expectations of something much lower, and b) immediately informed the Minister of what was going on, and advised her to call in, or write to (or both), the chair and the Governor to make clear that not only was the budget itself a fundamental breach of trust, but that the new bid was egregious and utterly unacceptable.
[UPDATE: This afternoon (4/9) MOF proactively released various documents relating to the Funding Agreement. Among them is Treasury’s preliminary assessment to the Minister of the Bank’s Funding Agreement bid, which is dated as late as 13 February.]
But there is no sign that the Minister did any of that, or that her expectations of Treasury monitoring of the Bank were sufficiently clear that Treasury did anything either. It seems not to have been until very early this year that the Bank finally began to get a sense that the bid was not going to fly.
In the end, she sort of got there. The final Funding Agreement limit was a lot lower than the Bank had wanted – and involved big dislocation for the Bank and staff because of the unauthorised spree the Bank had continued on with last year, when the Minister could have acted to bring it to a halt much earlier. Even then of course, the cuts relative to the Robertson levels were modest, and the current restructuring seems to be taking staff numbers back to about 2023 levels, probably still 50 per cent above what is necessary. And the Governor and board chair are now both gone. But what a messy and inadequate way to have got there.
It isn’t as if everything she has done as regards the Bank has been bad or wrong, but most of it has been late and/or weak, when she knew from Opposition days that it was a problem institution with a highly problematic chief executive. Who knows why. I wonder if some of it was that she just didn’t care much (it was a below the radar issue with no votes in it) and perhaps she was rather out of her depth (eg the limp arguments recently about independence, showing she has no deep feel for the legislative model, or an ability to articulate it). She seems to have been poorly advised, and ill-served by his own advisers and by The Treasury (which has since cleaned out and replaced almost all its senior managers).
But all in all it is a deeply underwhelming performance from such a senior minister. And if that stuff is just regrettable, avoidable and expensive, the coverup and deliberate sustained intention to mislead New Zealanders around Orr’s departure is inexcusable: weak, inept, and dishonest.
UPDATE: While I was typing this post I had an email from a senior political journalist who passed on this snippet (with permission to use it)
“On October 30 I interviewed Willis about her role as State Service Minister. So it was not an economic interview, per se. At the end of the formal part of the interview we chatted about a few things but we did not discuss the Reserve Bank until she brought it up and said she was determined to cut back its funding.”
Which is interesting, and perhaps consistent with my story. Her instincts were sound – the funding needed to be cut back – but it isn’t clear that she did anything at the time, and it isn’t even clear that she’d yet had any advice on the bid or was aware of the egregious 24/25 budget the Bank’s board had set for itself. The “strong signals” – see this morning’s post – don’t seem to have come until February, months later.
That was the Minister of Finance’s chief press secretary responding on behalf of the Minister to an inquiry from Stuff journalists shortly after Neil Quigley’s ill-starred press conference late on the afternoon of 5 March, the day Adrian Orr’s resignation was announced. But I’ll come back to that.
The main problem for the Minister of Finance, in finally encouraging Neil Quigley to resign late last Friday afternoon, is that throwing him to the wolves (well overdue) left her exposed to the long-running questions about what she knew and when, and what part she had played – actively or passively – in the choice to deliberately mislead New Zealanders about what had gone on around the out-of-the-blue no-notice resignation of one of the most powerful unelected officials in New Zealand, one who had generated enormous controversy in his time and whose frosty relationship with Willis, dating back to Opposition days, was obvious to all.
I’ve been writing on this, and on Monday the Herald’s Jenee Tibshraeny had a powerful piece calling out the Minister and noting that – unlike the public – the Minister got no, or next to no, new information from the Ombudsman-led Reserve Bank release on Thursday. The title of her piece said it all really
but noting, importantly (and emphasis added), that “Both the Reserve Bank board and Willis have engaged in what looks like a cover-up of the circumstances surrounding Adrian Orr’s resignation as Governor in March”. offering chapter and verse. This wasn’t just Quigley’s doing (or that of his board and temporary Governor) but Willis’s too.
The Minister apparently claims to regard these criticisms as unfair to her. She was, we were supposed to believe, a helpless Karori mother, pleading in vain for Quigley to be upfront with the public about the loss of one of her key officials, holder of an office where she – as Minister – is personally responsible for any hiring and firing, the one to whom (as the law requires) Orr’s resignation was addressed. Tibshraeny had another piece yesterday afternoon reporting the Minister’s side of the story. This seems to be the essence of her case for the defence
Setting aside for now the question of how much money the Bank has spent trying to stop the public knowing, all this tells us is what we already knew: that the Minister realised rather sooner than the Bank – and Quigley specifically – that the coverup and active misleading was untenable and could not go on indefinitely, but (a) the resignation was in March, and her earliest such comments were in June, and b) she did nothing meaningful about it (until last Friday) when she could have insisted on transparency from day one, or any time onwards. She had (considerable) leverage. But it is pretty clear that she and her office were fully party to the strategy of deceiving New Zealanders, probably hoping interest would quickly die away.
At this point, it is probably helpful to step back and step through the timeline in February and early March. (My overall, and updated, timeline is here.)
In preparing yesterday for this post I went back and read quite a lot of the initial coverage (5/6 March) and some of the OIAs. It was in a BusinessDesk column, dated 5 March, by their highly-experienced and regarded Pattrick Smellie, that I noticed this
I don’t recall noticing it at the time, and it has had no apparent follow-up. Perhaps it seemed (like a number of other things) unimportant that day, when it appeared that Orr had simply tossed his toys and walked off, and if it was apparent that we weren’t getting the full story, there was no reason to think we were being outrightly lied to. I have no idea whether Smellie’s “it is understood” had substance – but he doesn’t seem like someone who just interviews his typewriter – and put no further reliance on it, but if there is anything to it (or to the suspicion of it), it is probably relevant context. Once again, on RNZ this morning, the Minister was claiming it was important that she had nothing to do with the hiring/firing (or facilitated resignation) of Reserve Bank Governors, even though her role is quite central and explicit in the carefully designed Reserve Bank Act (current version, and all its predecessors since 1989).
The story seems to have unfolded through February. On 5 February Orr, having become frustrated with Treasury, advises his board and senior management that he had told staff to “cease and desist” negotiating funding agreement issues with the Treasury, suggesting that it should now be a matter for the Board and Minister directly. That stance seems not to have lasted because 10 days later (14 Feb) Orr and Quigley were exchanging notes about agreeing a deal with Treasury the following week.
But in the meantime, the Minister had been trying to get meetings that month with Orr on both funding agreement and bank capital issues. One of the Herald’s various OIAs revealed that Orr had been stonewalling, using as an excuse the “sacrosanct” nature of MPC deliberations during mid-February, and suggesting that he couldn’t meet with the Minister then, even on quite separate matters (this of course didn’t stop him having his usual pre-MPS meeting with the Prime Minister and Minister of Finance the day before the MPS itself was released). The meeting between Orr, Quigley (and, for part of it, Hawkesby), the Secretary to the Treasury, and the Minister on the afternoon of Monday 24 February was the earliest date Orr appears to have agreed to. In the interim, Orr had once again lied to the Finance and Expenditure Committee and, that same day (20 Feb) he and Quigley held a Funding Agreement meeting with mid-level Treasury officials where, not only was there no meeting of minds or settlement, but Orr so completely lost his cool, and must have refused later to apologise, that Quigley chose to put in writing an apology to the official concerned. Just an extraordinary situation – a board chair helpless in the face of his chief executive’s misbehaviour, unable even to secure an apology from the chief executive himself.
We do not know whether the Minister was aware of this episode before the meeting on 24 February. There is no paper trail shedding light on that (one way or the other), but it would be surprising if she was not made aware of how combustible Orr had become over these issues (and would the mid-level official handling Funding Agreement negotiations not have told his own boss or Rennie himself what happened, would no one in Treasury have alerted the Treasury secondees in MoF’s office, or indeed her – ex Treasury – political adviser? Would Rennie not have mentioned it to Willis?) Phone calls and oral advice don’t easily get captured in OIA responses, unless it suits responders to do so.
And so we come to the 24 February meeting. The Treasury file note of that meeting – which so enraged Quigley when he learned about it as the OIAs rolled in – is here. I had previously defended Treasury, noting that the record – of a high level meeting on important outstanding issues – seemed both reasonable and moderately expressed. But, as it happens, Tibshraeny revealed that yesterday she had a OIA response from Willis (beyond the original deadline) making it clear that the Minister herself had been very keen to have the meeting properly documented, having staffers followup with Treasury to ensure that it was being done.
This was the meeting where the Governor distanced himself from the Board, bagged Treasury, and then (so it seems reasonable to deduce) stormed out.
One thing I hadn’t previously noticed about this file note is that it records comments from the Minister on the earlier agenda items (bank capital reviews she was seeking, and banking competition issues) but there is no comment from the Minister recorded on the Funding Agreement issues (either before or after Orr walked out). It also records no comments from Treasury. Is that really credible (was it really only Orr and then Quigley who made any comments of substance?) or did it suit the Minister not to have had anything she said on those issues documented (given that we now know she had an active interest in the file note)? I don’t know, but it seems a reasonable question.
Things must have escalated quite quickly from there. It just isn’t conceivable that after that performance by Orr, coming on top of the 20 February episode at Treasury, that there was no contact to reflect on what had gone on between Quigley and either the Minister herself or senior people in her office (the latter perhaps for plausible deniability?) Quigley had pro-actively apologised for Orr’s conduct to a mid level Treasury official, so how much more assiduous was he likely to have been around the Governor’s performance in front of the Minister (especially when so much – future Bank funding – depended on the Minister)? Perhaps it was a one on one after the meeting, perhaps a phone call or two, but surely something?
At very least we know (from the RB’s June release) that within 24 hours or so – and before the board itself had met – various top RB officials independently became aware that exit was possible and established an ad hoc to manage the situation if it escalated. I happened to be listening yesterday to the recording of the Minister’s estimates hearing in June and there she states (three times) that it was on 24 February itself that she was told by the Secretary to the Treasury that “employment discussions” were underway between the Board and the Governor. (Other material suggests she may have had that date wrong and that the advice was on the 27th, but she did repeat the 24th a couple of times, in a hearing for which she will have been extensively prepared.)
And if, and the Minister now claims, she had next to no involvement in what came next, that must have been wholly and solely a tactical choice by her. She was, after all, one of the government’s senior ministers, the person concerned was one of her most senior officials (and by far the most prominent) and, by contrast, the Bank’s board then was almost entirely made of underwhelming Grant Robertson appointees, and Quigley had an established track record of not being a safe pair of hands in front of journalists etc under scrutiny. The Minister may have wanted to establish a “look, no hands [of mine] in this” but not only can she not credibly disclaim responsibility, but if there were concerns the board had – about things not visible to her – surely (as the hirer and firer) she had an obligation (to Orr, if no one else) to check them out. It might just have been an aggrieved, out of their depth, board. But, of course, Willis was aware throughout that that 24 February meeting – in her office – had been the final catalyst for the ouster. (And to be clear, I am not in the slightest critical of the ousting itself – Orr should never have been reappointed, and he appears to have acted recently in ways that handed those with power his own head on a platter.)
The Board and Orr met, and then exchange emails, including notably the Board’s statement of concerns for which they sought a response from Orr. (The Bank’s release last week only explicitly mentions recent issues, although my – generally reliable – inside source told me that it included concerns dating back several years.)
Through these days the Minister chose to up the ante, by providing quite specific comments to the Herald’s Thomas Coughlan for this article on Reserve Bank funding he published on 27 February. At the time, I thought nothing particularly of it, except of course to welcome comments suggesting cuts were likely to be required, because I/we then knew nothing of the backdrop. But the Minister did, and it is probable that she chose to respond to Herald inquiries, and to be as specific as she was, after the 24 February meeting, and knowing that a showdown with Orr was underway, knowing indeed that the Board would be meeting – and Funding Agreements issues would be on the table – on the 27th.
It was on the 27th that the statement of concerns was sent to Orr, and also when he got board approval for him stepping aside, remaining out of the office until the situation was resolved, with Christian Hawkesby to act as Governor. The Minister has since said she was aware that Orr had stepped aside earlier (before 5 March), and we must presume she was advised of it that day (there are – content redacted – texts involving Rennie and MoF that day). Are we really supposed to be believe that a highly political senior minister didn’t ask what was going on, or gave no guidance? If so, it can only have been because she did not want to be fixed with knowledge, but that does not change the fact that the evolving situation was her responsibility (she hires and fires, she is accountable to Parliament, the Board is accountable to her). At any point, she could have intervened and taken control (and probably should have, most especially around exit agreement issues).
By this point it appears that both sides (Orr and the Quigley, the latter for the board) had resorted to “senior counsel” to negotiate terms. By Monday afternoon (3 March) the ad hoc management committee had heard that agreement had been reached – although presumably formally documenting it means it wasn’t signed until 5 March. The plan at this point was for an announcement on either the Friday (7th) or the following Monday (10th), although at the last minute this is brought forward to 1:30pm on 5 March after Orr alerted people to concerns about leaks.
The Minister says, and I guess we must believe her, that she did not see, and has not since seen, either the letter of concerns or the exit agreement. But, again, this does not absolve her of responsibility. They were her board, Orr was her responsibility, and she was the one who was going to have to face parliamentary scrutiny. Did she not seek any assurances about lump sum termination payments, or things that resembled them? Did she not raise any issues about what would be said, by whom, when, let alone what sort of NDAs Quigley and the Board might be signing up to? The paper trail does not tell us, but it seems utterly inconceivable that there was no communication about what the story was going to be or how it would be told. And, again, if the Minister just sat back and let Quigley get on with it, she made herself part of such a strategy, if only by acts by omission. She was not a helpless victim (of Quigley here) but a powerful player making deliberate choices.
The paper trail suggests that the Minister had the planned Reserve Bank press release by late morning on 5 March (sent across by Quigley). This statement, which had been lawyered by both sides, represented the first attempt to spin the story. Recall that the Minister was not an innocent bystander here – it was her to whom Orr was actually resigning. The press release was full of “good job, well done, time to step aside” fluff, and there is no sign that either the Minister or anyone in her office raised any objections (to the text, or to the Bank-attached note which indicated that there was no plans to say anything further “if” there were questions). Willis knew that the statement was intentionally misleading – she has since told us she knew about the “employment discussions”, she’d been in the 24 Feb meeting, she knew Orr had been gone for a week, and yet she raised no objections. She doesn’t even seem to have asked what commitments had been made, by either side, under an NDA. But those were her choices; she went along.
OIAs reveal that she instructed her staff not to reveal to journalists what the 24 Feb meeting had been about, briefing notes (backpocket Q&As) prepared by her staff (and provided to PMO) were actively deceptive (“Did you have confidence in Adrian Orr as Reserve Bank Governor? Yes, I’m confident he discharged his obligations under the Act and that is consistent with the advice I received from the Board”, “Is Adrian Orr’s resignation linked to the funding agreement? Not that I am aware of.”), and her office encouraged her to use the “personal reasons” story (which wasn’t in the first press release), although it seems that she didn’t quite go that far herself on the day. Her own press secretary conflated – no doubt to Quigley’s annoyance – “personal reasons” and a “personal decision”, and when mid-afternoon the office was advised that Quigley was releasing another brief (and known to be misleading) comment (“Adrian’s decision to resign as RBNZ Governor was a personal decision. He has conveyed that with consumer price inflation within its target band, this time was right for him to step down.”) there is no sign that the Minister or her advisers raised any concerns whatever, not even to wonder how tenable such a position would prove over time.
But it goes on. Reserve Bank releases, my insider leaker, and the Minister’s own OIA releases suggest that Quigley had not wanted to do a press conference, but that he and the Bank were pressured by the Minister and her office to do so. And so he did. No one thinks he handled it well. And what were the Minister and office expecting or hoping he was going to say? Not the truth surely? They were fully complicit in the Bank’s approach.
I’ve had a automatically-generated transcript of the audio for some months but it was hard to read. Yesterday, I found the video of the press conference in a Stuff article from the time. With that, I completed a full readable transcript.
To assist readers, here I have inserted – in red – comments on the truthfulness (or otherwise) and straightforwardness of Quigley’s answers.
It really should serve as a case study for future crisis management communications courses and exercises in how utterly not to do it.
Much of the ground I’ve covered before so I won’t requote here in detail. It was obstructive, it was deliberately and knowingly misleading, and on occasion it was just outright false. As just one small example – which we have only known was false since last Thursday but the Minister says she knew all along – was his claim that there had only been an acting Governor since lunchtime that day.
It was utterly deceptive and misleading.
And yet, shortly thereafter a Post journalist emails the Minister’s chief press secretary and asks “is the minister satisfied that the Reserve Bank Board chair has given a sufficient explanation for why Adrian Orr suddenly resigned from his job.” An hour later Venter replies with a simple “Yes”. That was, as I noted above, reported in The Post at the time, but it didn’t seem very important, since we had no idea we were being lied to, apparently with the Minister’s knowledge and approval.
Willis has continued, to yesterday, to claim that, even thereafter, she was helpless, apparently an innocent victim of a board chair who ran amok. It is a story that doesn’t stand even a moment’s scrutiny. Not only could she have (threatened to) remove Quigley any time she liked (at will, not for cause), but (as she has confirmed) she was not party to any NDAs, and she (and Treasury) knew quite enough that she could have insisted on transparency at any time she chose. She and Treasury could have released the 24 Feb file note months ago, or the Quigley email apologising for Orr at the 20 Feb meeting. She could have insisted we were told “employment discussions” had been underway between the board and Orr, with her knowledge, she could have been open about the stark difference of view (she was aware of) on Funding Agreement issues, and by April she could have insisted on the release of that extraordinary Quigley email protesting that Treasury had written a file note of the 24 Feb meeting and might release it. She could have insisted, without overriding the RB on specific OIAs, on an early statement – or made it herself – on the lines on “Following employment discussions initiated by the Board, and brought to a head by differences between Orr and the board over funding agreement issues and Orr’s behaviour in several recent outside meetings, it was agreed that Orr would resign.” There would still have been follow-up OIAs, but we’d have been starting from a truthful statement, not from false and/or misleading statements exposed only by OIA upon painful OIA, a leaker, and some (limited) support from the Ombudsman.
The Minister of Finance was, therefore, an active participant in choices about what was done and what was said about what was done. That was so before the announcement on the afternoon of 5 March, before the Quigley press conference, and then for months afterwards. She knew the truth and she chose repeatedly and persistently, to keep it from New Zealanders. That is pretty extraordinary, pretty inexcusable.
One is left wondering how they (Board, Hawkesby, Willis, her advisers) ever thought they were going to get away with it. No one seems to have stress-tested a comms plan, which is extraordinary in itself, for an event of such significance and inevitable public and commentator and (belatedly) political interest. I guess it is good that Willis realised before the Bank that the game was up and that something closer to the truth would have to come out, but even then for too long her response was feeble, possibly concerned that doing more would – as it has done – expose her involvement and support for the approach more fully.
The fault was not in helping to engineer Orr’s exit – that is to her and Quigley’s credit, given the glaring behavioural record, come to a head in late February – but in the choice to obstruct and to mislead New Zealanders. And people wonder why trust in our institutions and politicians is in decline……
UPDATE: Forgot to include here that press release of MoF’s last Friday afternoon announcing Quigley’s resignation, with all the spin about “good job, well done, time to go”. Perhaps she never even read it before it went out, and she did back away moments later in a radio interview, but….
Those were the words that sprang to mind on Friday evening when I heard the news that Neil Quigley had finally resigned as board chair (and board member) of the Reserve Bank. There had been more than enough in his conduct over recent years, and in what he tolerated from Orr, that Quigley should have gone long ago – and certainly shouldn’t have been reappointed by Willis last June – but had it not been for the repeated and sustained efforts of mislead the public over the circumstances of Orr’s departure no doubt he’d have seen out his term (which expired 30 June 2026).
Both the government and the Bank will no doubt be hoping that Quigley’s resignation marks the end of the story. It shouldn’t be, although it should at least mark the turning of a corner that might allow a badly diminished central bank to begin the task of rebuilding, including (critically) rebuilding confidence and trust among both the wider public and expert observers. As it is, Quigley almost singlehandedly (but enabled by the Minister, the rest of the board, and the temporary Governor) has dragged the Bank’s standing much further down in recent months (and his own standing too, but I guess that is his problem).
A few decades ago, the Reserve Bank of New Zealand was highly regarded internationally. It would never have the depth of resources, or outputs, of the world’s major central banks, but innovative policy approaches, a commitment to a degree of transparency that (at least by central bank standards – not high) was unusual, and a lean and efficient approach to its own operations, all supported by legislation that clearly distinguished between goal-setting (primarily for the elected government) and monetary policy operations (in which the Bank had operational autonomy) contributed to the reputation. You could debate how much difference it actually made to New Zealand, but it certainly got us invited to a better class of conferences (and made it easy to attract highly capable visiting scholars etc whom we learned from).
And now we are in the position where within six months both the central bank Governor and the board chair have gone, for cause in both cases, and we currently have only a temporary Governor and a temporary fill-in chair. It is very unusual in advanced countries for a Governor to be edged out on conduct grounds (it is in fact unusual for a Governor not to complete their term), and here we have seen both the Governor and the chair ousted in circumstances which, in each case, reflect poorly on the individual concerned, and (I believe) on the New Zealand policy/political environment that enabled this mess. It might be, as second best, good that our system meant that behaviour had consequences, but the public deserved better – the situation(s) should simply never have arisen, and would not have done so if those responsible (ie politicians) had taken responsibility, and acted, earlier.
Over the weekend, Labour’s finance spokesperson weighed in, noting the twin departures. She was keen to sheet home responsibility to Nicola Willis and the current government (well, she would wouldn’t she?) but in Orr’s case in particular he is much more of a shared responsibility than Edmonds would prefer to acknowledge openly. He was first appointed by Grant Robertson (& the then Labour/NZ First government) in late 2017, but had been nominated by a Reserve Bank Board itself appointed entirely by the previous National government. Despite all the well-documented concerns/issues, Orr was reappointed by Grant Robertson in late 2022, over the objections of both ACT and National (Labour had amended the law to require such formal consultation). The massive spending spree – and staff bloat – was enabled and authorised by Robertson, and Quigley was made chair of the newly-powerful new Reserve Bank Board (now an actual governing body, not just responsible for monitoring the Governor/MPC) by him. Of course, Labour left office in late 2023, but they left a toxic combination to the next government. The new Minister of Finance did not handle that situation well, and – as documented again last week – was played for a fool by both Orr and Quigley when, in a climate of general public spending restraint, they set a Bank budget for 24/25 that was (a) a big increase, and b) far in excess of what even Robertson’s Funding Agreement allowed. They didn’t tell her this, and when (when precisely?) she and Treasury eventually found it, she seems to have done nothing at all in response. Quigley himself was reappointed last year, for reasons no outsider can yet fathom. And if we are sharing around responsibility, Parliament’s Finance and Expenditure Committee – under Labour and under National – seems to have been largely supine in the face of Orr/Quigley, never even taking seriously when Orr quite openly provided false information to them and/or actively misled them (usually flanked by other senior managers). Yes, some members sometimes asked pointed questions (including Willis in Opposition) – and saw (again) the prickly side of Orr – but there was never any follow through from the committee as a whole. If we want high standards maintained in public life, we have to be prepared to sweat the small stuff – to make a fuss and insist on those standards, even when individual issues might seem small. No one in official/political New Zealand did – under multiple governments – and we ended with this year’s mess.
But it was a) the Reserve Bank Board, and b) the current Minister of Finance who were in charge for the last year or so, and so the rest of the post focuses mainly on them.
Quigley has been tossed to the wolves, as he should have been. One need not have any sympathy for someone who as late as 2pm on Friday – a little under three hours before, under pressure, he finally resigned – had the Bank’s comms team feeding this defiant and unrepentant stuff to The Post.
Yes, some people did initially conflate Quigley’s words but for months everyone has recognised that he used the term “personal decision” ANDthat that usage was deliberately misleading and had been from day one, including because it was not used in isolation but together with lines like this (from the afternoon of 5 March)
Or the repeated denial (beginning at Quigley’s press conference that day, but continuing for months) that there was anything to see here (and notably that there were no conduct or behavioural concerns). If there was ever any inadvertent misunderstanding, the onus was on Quigley – well-paid head of a powerful government board – to have cleared things up. Instead, he actively misled us for months, unrepentant to the end (not only in those Friday lines, but in his Thursday statement on the Ombudsman’s ruling, which he claimed vindicated the Bank and his own approach).
But the Board chair is not, and was not, the governing body of the Bank, and all those other directors are still in place. Most were there last year when that egregious budget was set, most were there last year when they unanimously bid for substantial increases in approved funding over what had been allowed in the previous Funding Agreement. And if they saw the light, on the government’s tolerance re funding, earlier than the Governor did, and then helped engineer his exit, they deserve a little credit for that. But they were also responsible for the exit agreement that attempted to hide from the public what had actually gone on, they have sat by as the OIA obstructionism went on, and they sat silent while their chair actively and repeatedly misled the public. Either they agreed with the chair’s acts/choices – in which case they share direct culpability – or they didn’t and (despite holding a majority) did nothing, in which case they are useless under pressure and unfit to hold the well-remunerated board positions. Decent board members – particularly the four who were in office throughout the last year – would tender their resignations, and the government would accept them (perhaps allowing just enough time to get a strong and capable board appointed in their place).
It also hasn’t been the finest hour for Christian Hawkesby, the temporary Governor (and thus, as I read things, temporary board member). Sure, it was a difficult position for him – notably because he has acknowledged that he has applied to be the permanent Governor – but the measure of a leader is their performance under pressure, when hard calls have to be made. Again, either Hawkesby supported Quigley’s calls since 5 March, which makes him directly culpable, or didn’t but was unwilling or unable to get his way – not even to keep his staff out of things on Friday afternoon – which does not speak well to his fitness to be Governor (even if he hadn’t himself already actively misled FEC).
And that brings us to the role and performance of the Minister of Finance. You will recall, from earlier posts, that under the law (and as it should be) she is responsible for hiring and firing the Governor of the Reserve Bank. The Board has a role in monitoring the Governor’s performance (as The Treasury does in monitoring the Bank as a whole) but the legal power and responsibility rests with the Minister of Finance, the only participant in this mix who is answerable to Parliament and whom, as an MP, we can toss out.
She was culpable on multiple counts, before and since the Orr situation came to a head in late February:
She reappointed Quigley as board chair in June 2024
Neither she nor her office show any sign of having been all over the Bank when, six months into her term, the Bank gave her chance to comments on its draft Statement of Performance Expectations, which should have included the proposed budget, but didn’t,
There seem to have been no consequences (no one dismissed, no stern written warning) when she eventually learned that the Bank had set itself such a generous budget and was still ramping up staff numbers (and expensive floor space),
She seems not to have asked any hard questions of Treasury, officially funded to monitor the Bank (and, to be fair, Treasury itself seems culpable, apparently asleep on the watch),
When the Bank’s egregious funding agreement bid came in in September 2024, neither the Minister nor the Treasury seems to have slapped it down early (rather letting things drift for months).
Of course, we can’t blame Willis for Orr’s behavioural meltdowns (those meetings with Treasury on 20 Feb and with her and Treasury on 24 Feb). Once again (there is after all a long history) his conduct was egregious, and in really critical circumstances (the funding for the next five years was up for grabs). Using it as catalyst to (very belatedly) address concerns that had evidently for several years was welcome, if overdue.
But we haven’t had straightforwardness from Willis either on what happened next, or on her role since 5 March.
After Orr stormed out of the meeting with Treasury and the Minister on the afternoon of 24 February, it is simply inconceivable that there was no follow-up discussion between the Minister (or just possibly her office) and the Board chair on what had happened that day. After all, Quigley had apologised to a mid-level Treasury official only days earlier when Orr had lost his cool in that meeting. Was he going to be any less assiduous when it came to the Minister herself, and how is the Minister likely to have reacted when her Reserve Bank Governor storms out of a meeting with her and the Secretary to the Treasury? We know that the process leading to the exit got underway almost immediately (various senior RB management were exchanging emails on it, and setting up a process to manage things, within about 24 hours). And although we must take the Minister at her word when she says she has seen neither the statement of concerns Quigley emailed to Orr, nor the terms of the exit agreement the board and Orr reached, she has now acknowledged – months later – that she had known that Orr had left office days before the official announcement of the resignation (and the PM this morning acknowledges that he was aware of what was going on too). And wasn’t her responsibility, on behalf of the public, to ensure that if the board was negotiating exit agreements (why were there at all?), that any such agreement – which didn’t bind her or Treasury – was not designed to hide from the public, or repeatedly us, as to what had gone on. And Willis and her office must have known that Quigley is famously poor and prickly when exposed to the public. She should have taken control of the process pretty much from the start (even if she used the board to do some detailed stuff). It was, after all, her to whom Orr had to submit any resignation letter (as he finally did on 5 March).
The Minister attempts to excuse herself now by noting that over recent months she (and apparently Treasury) had expressed concerns to the Bank about how they were dealing with OIAs. Quigley seemed to be rapped over the knuckles in public two or three times before the end came on Friday. The Minister could not directly overrule the Bank in its handling of its own OIAs, but she could have insisted months ago – way back on 5 March, and ever since – that the public not be misled. Her office had seen the press release on 5 March before it went out – but there is no evidence of any remonstrations or concerns – her office knew the statement Quigley made mid-afternoon (see above), she knew what Quigley said at the 5 March press conference, and she and her staff have seen every misrepresentation etc since. And she knew that they were all wholly misleading and did nothing to sort things out, to make clear that her board chair was actively and repeatedly misleading the public. She wasn’t bound by any NDAs (a point Heather du Plessis-Allan made to Willis in an excellent interview on Friday night), but instead of clarifying things, and insisting Quigley did so, she spent months claiming she knew little or nothing and that it was nothing to with her. In so doing, she actively facilitated and abetted the cover-up and the effort to mislead.
And it was so right to the end. Look at her press statement on Friday afternoon.
It was exactly the same sort of phraseology Orr and Quigley had used back on 5 March, to suggest it was all very normal, nothing to see here, and just good jobs now done, time to move on (media reports suggest that Quigley’s resignation letter went further, claiming that he just wanted to spend more time with his medical school).
Now, in fairness to Willis, this last attempt to mislead the public lasted not much more than minutes. She – and to her credit – did an interview almost immediately with Heather du Plessis-Allan, surely New Zealand’s best interviewer, where she largely walked away from the spin, and indicated that while there had been no ultimatum to Quigley, had he not finally tendered his resignation she would have asked for it. But what is on record – her own press statement – just repeats the flannel, and the attempt to frame things in a way that involves as little recorded accountability and culpability as possible.
And then this morning (on RNZ) the Prime Minister only adds to things
But it really should be utterly unacceptable for a Minister of Finance to have, over months, deliberately abetted a cover-up when at any time she could have made clear the circumstances of Orr’s resignation (itself an event widely welcomed). Who knows what drove her originally. Perhaps a desire not to be seen to “politicise” things? But a) the law is clear and responsibility for hiring and firing the Governor rests with her, and b) there is simply no excuse in these circumstances for misleading New Zealanders so egregiously. Out of the whole affair, and even having finally got rid of Quigley, she seems weak and untrustworthy. Hardly a state of affairs desirable in a Minister of Finance, and all the more so when we now have an enfeebled central bank without either a substantive Governor or board chair.
There seem to be twin lessons: do sweat the small stuff, and do be open and transparent (and if you don’t as so often it will be the attempt to cover-up or obstruct that greatly worsens things).
croaking cassandra 