Reserve Bank Board

Weak minister, weak institutions

Michael Reddell Adrian Orr, Quigley, Reserve Bank Board

We’ve all seen or heard of the sort of parent who has a troubled teenager or young adult but who is always making excuses for, or minimising, the child’s repeated bad behaviour. Yes, yes, that [insert specific] was wrong, but really s/he is a good girl/boy. Parental love is, as it should be, a powerful force (mostly for good) but in those cases the indulgence and excuse-making rarely ends well.

It was a parallel that came to mind in thinking again about the extraordinary way in which Nicola Willis has indulged Neil Quigley, the chair of the of Reserve Bank Board, in which role he now seems to have had more lives than the proverbial cat. No one seems to understand why she reappointed him to one last two year term as chair last year (having already been caught out actively misleading Treasury and the public, and having accommodated pretty all of Orr’s own excesses, policy and behavioural, and uneasy relationship with the truth). And things have only gone downhill from there. The same week Quigley’s reappointment was announced, he released the Bank’s 2024/25 Statement of Performance Expectations which included an operating spending budget far in excess (23% in excess) of spending allowed to the Bank for that year in the last year of the old Funding Agreement, as amended by Grant Robertson just prior to the last election. When they had sought comment from the Minister on the draft SPE (as the law required them to) they simply failed to tell the Minister how much they proposed to spend – and it appears that neither she nor Treasury thought to ask (in their defence, presumably they implicitly assumed that the Bank would simply operate consistent with the Funding Agreement limits).

Then they – Quigley, Orr, and the rest – used that egregious budget not only to lock in fancy new and big long term office space in Auckland, to keep driving up staff numbers, but also as a base for their bid for spending for the next five years, all the while claiming their bid was quite consistent with the Minister’s expectation (as I noted on Wednesday, it seems that on the letter of what MoF had said it was – she and Treasury probably assumed they were dealing with decent and honourable people – but in spirit and substance it was anything but). They were eventually knocked back, but staff (lots of layoffs) and taxpayers (restructurings cost) are paying the price. The Board members, notably the chair, remain in office.

And, of course, it was capped by the extraordinary dishonesty of the last six months around the departure of Adrian Orr (I used to say “on 5 March” but it turned out yesterday he’d already been out of the office for a week prior to that) in which Quigley has – from the moment the first press release dropped – been actively misleading the public about what went on, attempting to block scrutiny, and (as revealed the other day) deploring Treasury’s compliance with the Public Records Act in writing a moderately-expressed file note of a major policy meeting between senior Bank and Treasury people and the Minister of Finance. Once again, it was too much for the Minister of Finance (and this time Labour’s finance spokesperson joined in), but….. Quigley (and the rest of the Board, and the governance of the Bank is vested in them collectively not in Quigley individually) is still there, even though his position as chair is one that Minister can remove him from more or less at will.

I won’t bore readers by tracing through all the chaotic litany of active misrepresentations we’ve been subjected to (and yes “litany” there was meant to evoke Peter Mahon) over the six months, through press statements claiming it was just that inflation was down and it was time to go, denial that there were any policy or conduct issues, claims that Quigley still had confidence in Orr, then the 11 June statement which again actively misled the public, through to yesterday’s new (and still selective) timeline. But just an example, compare and contrast his interview with Heather du Plessis-Allan little more than a month ago with the story revealed in yesterday’s release (which, incidentally, further confirms the story I first reported here from the anonymous insider who leaked to me). We have been misled and obstructed, deliberately, from day one – by someone who reveals repeatedly a disdain for public scrutiny and accountability, let alone the law when it might inconvenience him. Almost singlehandedly (although don’t forget Hawkesby and the rest of the Board) Quigley has materially furthered damaged the reputation of an institution already badly diminished by the now-departed Governor (who’d been lying to FEC the very morning he’d lost his cool at Treasury, forcing Quigley to apologise for at least the second of those). It is, frankly, scandalous that Quigley is still in office. A growing number of observers, not just those with a specialist in the Reserve Bank, seem to be reaching the conclusion that his position should be untenable.

It was, I think, the Taxpayers’ Union whose statement on Wednesday (ie before even yesterday’s release) which best captured for me what the repeated inaction says of the Minister of Finance herself.

This is a major and very powerful public institution. The Board is put in place by the Minister to serve taxpayers’ interests in governing the institutions, but they seem to have driven a cart and horses through any sense of acceptable standards (whether around the spending or the attempts to obstruct and cover up in recent months). The institution is diminished, the standing of the individuals (notably Quigley) is diminished, and the Minister of Finance – responsible to Parliament and the public for the Bank – does nothing beyond disclaiming all responsibility and occasionally wringing her hands and wishing that her recalcitrant or rogue chair would only behave a bit better. What sort of Minister of Finance does that make her? She (and Treasury) was played for a fool herself, and she has let the public be repeatedly lied to. An effective minister would have dished out condign punishment months ago. From Willis, nothing.

Quite why is anyone’s guess. Perhaps she is just grateful that Orr is gone (aren’t we all?) and the board did help trigger that. Perhaps there is something about the medical school – would it reflect badly on the government if they now ousted as chair the chap they’d just given a controversial medical school to? Some claim it is that Quigley is a National partisan (I don’t take that one very seriously. He might fancy himself as a political operator – though as Jonathan Milne’s profile a couple of months ago noted, people who’ve been on boards with him don’t think he is very good one – but….he was reappointed as chair as recently as 2022 by a Labour government). There are, of course, still substantial unanswered questions about the Minister’s own involvement in, and knowledge of, events leading up to the Orr resignation announcement (and Quigley and the Bank are clearly still covering for her, with no mention in any of their releases regarding contact with the Minister or what she was advised or, and aware of, when). But it all reflects very poorly on her, including associating – the Minister of Finance – with a sequence of events which has left the standing and authority of the nation’s central bank in the gutter, and with Quigley still responsible for wheeling up the nominee to be next Governor – and if the Minister accepts Quigley’s nominee, that person’s standing will be tarred from day one.

Quigley should have gone long ago. But he should go now. He should do the decent thing and resign. But if he (still) won’t, the Minister should not have any hesitation in removing him, certainly as chair, and probably as a board member too (the standard there is tougher, but clearly met).

For the rest of this post, I want to (a) step through the legal provisions, and b) address any concerns that somehow removing Quigley (and, possibly, other board members, especially those from 2024) would be in some sense Trumpian (with his current attempt to fire Lisa Cook from the Federal Reserve Board of Governors). It wouldn’t. These bits are for reference/reassurance and anyone who simply wants to take my word for what can be done can easily stop here.

Legal Provisions

In many government entities, board members can be removed more or less at will. That isn’t so with the Reserve Bank, a conscious choice made in overhauling the Act in 2021, presumably reflecting the key policy role the Board has around financial system regulation and supervision. One can debate the pros and cons of that model, but the law is what it is.

Take the chair’s position first. The chair and deputy chair are directly appointed from among board members by the Minister

There is no requirement to specify a term for the appointment, although Willis reappointed Quigley last year explicitly for what was envisaged as a final two year term.

And if the chair (or deputy chair) can’t be removed instantly, in substance it is pretty close

The Minister is not required to specify a cause and can act once she has consulted with the person affected.

Removing Quigley as chair would still leave him as a member of the Board.

There is a tougher test to be met to remove a board member. Here is what the Act says.

And here are the relevant bit of their duties. First, the collective ones

And these are from the individual duties

The Act is also pretty clear that the duties are owed to the Minister. For example

It would seem not difficult at all to remove Quigley from the Board altogether on multiple grounds including (a) not operating in a manner consistent with the spirit of service to the public (his disdain for legitimate public interest and scrutiny has been manifest and explicit on numerous occasions), b) not operating with honesty and integrity (in the coverup of the last six months), and c) in threatening non-collaboration with Treasury unless they defied the Public Records Act, and d) in not operating in a financially responsible manner (setting that 24/25 budget so far in excess of what was allowed for that year, and associated locking in property spending that could be warranted only if somehow the government had made something like that level of expenditure permanent, something for which he had no reasonable grounds to believe was likely to happen. But quite probably if Quigley was removed as chair, or stepped down voluntarily or under duress, he would not want to see out the last nine months as an ordinary board member again.

I reckon there is a pretty reasonable case that all the remaining 2024 board members could also be removed, since they have either supported or done nothing to stop, the decisions and behaviours described above. Probably the only board member in the clear is former Deputy Governor Grant Spencer who only took office in early July this year (although with each passing week of Quigley’s conduct and the Bank still providing only partial information his position is weakened), with Philip Vermeulen a marginal case (he was an observer – “future director” – last year, but became a full director on 13 February this year). I think there is a strong case for removing the deputy chair Rodger Finlay and Byron Pepper (both of whom had earlier ethical issues around their appointment) and Jeremy Banks and Susan Paterson, but I guess a) it isn’t likely to happen, and b) you would need a strong bench of replacements straight away. But it is a choice open to the Minister.

Lisa Cook comparisons

President Trump has, of course, been looking to oust members of the Federal Reserve Board of Governors. For now, he seems to have given up on the chair, Jerome Powell, but this week has (purported to) dismiss Lisa Cook, justifying it on the grounds of alleged misrepresentations (of the sort that, if true, could be fraudulent) relating to mortgage applications she had lodged before becoming a Governor.

People can and will debate the merits of the issues, and the legal one is likely only to be decided by the Supreme Court determining what “for cause” means in the context of the Federal Reserve legislation. But it is pretty clear that Trump wants more influence – direct, or through chosen appointees – as regards monetary policy decisions. Unsurprisingly, that is controversial and can be seen to go towards the heart of central bank operational independence, which has become a hallmark of most advanced country central banks in recent decades.

Quigley’s position (or indeed that of the other board members) is quite different in a number of ways.

In terms of policy/economic substance, the most important difference is that Cook is a monetary policy decisionmaker (all members of the board of governors have permanent positions on the decision-making FOMC). Quigley – and the Board – are not. Monetary policy decisions in New Zealand are made by the Monetary Policy Committee consisting of the Governor, three other internals, and three externals. The Board’s role is to (a) nominate MPC members, including the Governor (but the decision is finally the Minister’s and Cabinet’s) and b) to monitor and review their performance (since the Board can advise removal if MPC members breach their individual or collective duties). The Board does have important independent policymaking powers in respect of financial system regulation (eg bank capital requirements are a board policy decision now), and given the government’s expressed preferences re some of the banking regulatory issues there might be some queasiness about removing board members…..if it were not for the fact that their performance on quite other well-documented matters (and especially that of the chair) evidently rose to the standard for removal.

And that sentence is the other main point. We – and the RB – are not operating under decades-old legislation with fuzzy language around removal powers, but under brand new (2021) legislation, explicitly designed to ensure (a) that the chair is readily removeable, and b) that all board members are explicitly accountable to the Minister for their performance of their individual and collective duties, with removal an explicit remedy open to the Minister in the event of (serious) breaches.

The coincidence in timing with the Trump activities is unfortunate, but – frankly – the debasement of our institutions while the Minister wrings her hands and does nothing about egregious behaviour of the sort we’ve seen is, for want of a better word, more Trumpian (much more so) than taking breaches seriously and acting accordingly to signal that we will insist on high standards from those running our government agencies. That we will sweat the small stuff and (as this become) the big stuff.

Failure to act (specifically on Quigley) is a terrible signal from the government, both of the weakness of its own senior minister and (suggestive) of an indifference to high standards in public life.

A timeline

Michael Reddell Adrian Orr, Quigley, Reserve Bank Board, Treasury

(I was going to follow-up on yesterday’s post and the associated (and welcome) media and political reaction regarding Neil Quigley’s latest disclosed (mis)conduct, but a new statement from the Reserve Bank this morning has seen that overtaken by events.)

The egregious chair of the Reserve Bank Board, Neil Quigley, has been at it again this morning. The Ombudsman has been inquiring into at least some of the complaints regarding the Bank’s handling of OIA requests around Adrian Orr’s departure. Here I stress – in contrast to the Bank’s statement this morning – “some”, since I have a letter from the Ombudsman yesterday that they are still looking into parts of my complaint on these issues

The outcome of the inquiry that the Ombudsman has concluded was that a) the Bank was not obliged to release any other documents than the carefully selected and very partial group, designed as much to mislead as to illuminate, that they released on 11 June, and b) that the Bank has, on the Ombudsman’s recommendation, nonetheless released a (also rather partial) “summary timeline of events relating to Mr Orr’s departure” (included in the statement at the link above).

Quigley engages in some self-congratulation in this morning’s statement thus

Which is just an extraordinary claim since (a) delaying tactics are a serious issue in their own right, b) many of their responses never identified (and still have not done so) specific reasons for withholding specific documents, c) some aspects of OIA requests were simply ignored, and d) some are still outstanding. To which I could add that the pro-active statement (and selective document release) of 11 June was clearly designed to mislead, and much light has since been shed by a combination of (a) the apparent insider who leaked to me, b) releases by the Treasury in the wake of that leak, and c) the timeline the Bank has just released. Between all that and Quigley’s own very public obstructionism, open disregard for the intense public interest in this matter, and actively misleading answers to questions dating all the way back to 5 March (probably questions to public officials formally count as Official Information Act requests), Quigley’s claim would be laughable if the situation weren’t so serious. Much is still unanswered.

Anyway, the point of this post is to put in place a rather fuller timeline, drawing on all that we now know, including but not limited to the Bank’s release this morning. In a small number of places I will insert things that must have been so but are not formally confirmed in documents, but where I do that I will explicitly indicate as much. As much as anything, those items point to continuing gaps in the record. A few comments follow below the timeline.

Orr departure timeline as at 28 August (the document might be updated if further information emerges but the current text is below)

Quite a few things are still less than clear, and are deliberately not being disclosed:

  • there has been no indication as to what the Minister knew, when she knew it, including what (if any) contact she or her office had with Quigley after that meeting on 24 Feb,
  • we have none of the text of emails between Orr and the Board after 24 Feb (despite others, that seem to suit the Bank, being released, and others having been released in the past), or of exchanges among Board members themselves,
  • we do not know why the Board agreed to an exit agreement at all (if, as it is described, Orr had lost trust in Treasury, the Board, and the Minister –  and noting that he was the employee –  the simplest thing would be for him to have resigned, under standard contractual conditions)
  • or why the exit agreement seems to have provided for Orr to have been paid in full despite being absent from the office for more than a month,
  • we do not know the character or general terms of that exit agreement (eg who isn’t allowed to say what –  noting that Quigley has previously attempted to hide behind that agreement, before a lot more later came out),
  • we do not have an explanation or apology from Quigley for what was pretty clearly sequential efforts to mislead (and worse) the public, starting from 5 March (and further reinforced by the attempt revealed in full yesterday to squash Treasury’s file note of an important policy meeting),
  • we do not know if the other board members knew of the exit agreement terms before they were signed, and
  • we are led to believe that MoF, to whom Orr actually resigned, had no knowledge of the terms of the exit agreement.  If not, why not (as the person actually responsible for hiring and firing).
  • do those ex gratia payments to seven staff, each made after Orr left, relate to complaints about Orr and his conduct?
  • And perhaps someone might ask how much staff/Board time and outside legal expense has been incurred in almost six months of obstruction and coverup, when things could have been set out simply and straightforwardly months ago.

Reserve Bank, Treasury, and Willis

Michael Reddell Adrian Orr, Funding agreements, Quigley, Reserve Bank, Reserve Bank Board, Treasury

There have been numerous OIA requests around events leading up to and surrounding the (pretty clearly) coerced exit of Adrian Orr on 5 March. The Reserve Bank in particular continues to keep on with a fair amount of delaying and stonewalling, clearly resistant to the idea that the public has any real right to know what happened, in a case involving one of the most powerful officials in New Zealand, with a track record of poor personal behaviour and very costly policy choices. Judging from a couple of their recent responses to me and one I noticed to someone else via fyi.org they seem to be working towards a date around 18 September (at least three requests are extended to that date), perhaps around the expected timing of any final Ombudsman determination on the various appeals already in train. By then it will be well over six months since Orr resigned, and that it is with the Ombudsman apparently taking this matter seriously. It is pretty bad, in both appearances and substance, and had the Bank and the Minister of Finance been at all serious about transparency and accountability we could have had a full reckoning within a couple of weeks of Orr’s departure, and then moved on towards rebuilding the institution and with it its credibility and authority (eg that “social licence” Orr used to like to bang on about).

And yet, various responses do come in. While I was away last week there were responses – each with some information – from the Reserve Bank itself, from The Treasury, and from the Minister of Finance. In their different ways, whether by acts of commission or omission, they do not show any of those three parties in a good light.

You’ll recall that it was the Reserve Bank’s egregious Funding Agreement bid, and the resistance to it by the Minister of Finance and Treasury, that finally sent Orr over the top, resulting in behavioural breakdowns (described in the Herald the other day, with apparent extreme understatement, as “including at least one indecorous outburst”) that led to his coerced resignation.

I’ve been trying for months to get to the bottom of this; both how they ever made such an egregious bid in the first place, and how Treasury and the Minister did so little for so long, such that this only came to a head in late February (the bid having been submitted in September).

We know:

  • that in her letter of expectation to the Bank’s Board in April 2024 the Minister set out her expectations about future spending.   Against the backdrop of what was happening to other agencies most people would read this as suggesting that the Bank could expect less authorised spending under the new Funding Agreement than under the old one.
  • The Reserve Bank nonetheless went ahead and set its own 24/25 budget (which it could, in law, do) 23 per cent above the amount of operating spending authorised for that year by Grant Robertson in a variation to the previous Funding Agreement made just prior to the 2023 election.
  • The Reserve Bank did not tell the Minister of Finance this, by the simple device that when –  as the law requires – they gave her the opportunity to comment on their 24/25 draft Statement of Performance Expectations, they simply left out the planned budget amount. (It was filled in in the final published version but…..who reads such things).
  • The Treasury seems not to have raised any concern about this egregious 24/25 budget –  it isn’t even clear they asked about it or were aware of it at any time during 2024 – and certainly did not alert the Minister to what had happened.
  • The Reserve Bank (and note that this was the Board, unanimously, and not just the Governor) in September 2024 lodged a bid for the 2025-30 Funding Agreement that was quite explicitly set on the basis of involving a level of future operating spending 7.5 per cent below their own (grossly inflated) 24/25 budget.
  • Numbers consistent with this bid found their way into the HYEFU expense tables in December last year (Treasury telling me that they simply took the numbers the Bank gave them).
  • Treasury appears not to have engaged seriously with the Funding Agreement bid until February this year.

It was pretty much beyond comprehension all round. How could the Reserve Bank Board have the gall to have a) set such an initial budget inconsistent with the recently updated funding agreement and b) then used that as the base for a bid for such a higher level of resources (incidentally going on to commit to large and expensive new office space in Auckland without any certainty as to their future approved spending)? How could the Minister of Finance, who had very evidently been no fan of Orr, have let all this happen (where was her suspicion/curiosity, where was that of her advisers)? And how could The Treasury, supposedly the guardians of the public purse and specifically charged with monitoring the Bank (and Board minutes show Treasury DCEs turning up for chats at Board meetings), have been so oblivious to what was going on (would this have been an acceptable standard in any other government department monitoring its Crown entities)?

The Bank has been quite obstructive in releasing the relevant material (Treasury, more cooperative, reveals that it really had none) and are still refusing to release the final Funding Agreement bid that went to the Bank’s Board (I really only want it to check whether the Board exercised any discipline on management excess but the minutes suggest not). However, in consultation with Treasury, they have now released a letter of expectation sent by the Minister of Finance to the Board chair headed “Expectations for the 2025-30 Funding Agreement proposal and review process”.

The version they released has no date on it (I asked yesterday, but perhaps they’ll take another 20 working days to reply), but it must have been after the April 2024 general letter of expectation (see above), although perhaps not much after it.

[UPDATE 8/9: The Bank has confirmed to me today that the Board chair received the funding agreement letter of expectation from the Minister of Finance on 3 April 2024.]

If you were dealing with honourable people, it would be a perfectly reasonable letter.

The Minister outlines the general fiscal context:

In pretty much any core government agency the budget for 24/25 would have been the appropriations made by Parliament for that department for that year. The Reserve Bank was different, because it had a five year Funding Agreement, in which approved operational spending for each individual year was specified. The Minister (and Treasury, as drafters of the letter) should still have been safe because you’d surely be able to count on the Bank having set a 24/25 operating expenses budget very much in line with the limits in that previous Funding Agreement for 24/25?

With decent people, but not it appears with the Reserve Bank Board (Quigley, Orr, and the rest). They simply set themselves a budget for 24/25 that bore no relationship at all to what they’d previously been allowed to spend for that year, and then took the Minister at her (literal) word and put in a bid 7.5% lower than that grossly inflated budget. And thus, per the covering Board paper dated 12 August 2024, Bank management (in this case, two of the – very many – deputy chief executives, Greg Smith and Simone Robbers) offer this assurance to the Board

And on the letter of the Minister’s request, it was indeed so. But it was fundamentally dishonest and any half-alert board members (including, but not limited to, Quigley and Orr) must have known that. It is almost inexcusable that any of the Board members involved – both in setting the 24/25 budget itself, and playing fast and loose with the clear intent of the Minister’s letter, in turn leading to the massive dislocation to the organisation and its staff this year – are still in office (driving the determination of the nominee to be the next Governor).

These are the guilty men and women who are still in office, drawing (incidentally) the highest board fees for any non-commercial government agency in New Zealand:

Nei Quigley (who, for reasons apparent to no one else, the Minister continues to express confidence in)

Rodger Finlay, the deputy chair

Jeremy Banks

Susan Paterson

Byron Pepper

Meanwhile, Treasury seems to have been asleep at the wheel, and doing a particularly poor job in pro-active advice to the Minister, in drafting things in a way that ethically challenged people could not drive a cart and horses through, and in undertaking constant and reasonable challenge and scrutiny of the Bank. And the Minister and her team hardly emerge looking good, when they been clear all along that they’d had doubts about Orr.

Where, you might also wonder, were the Opposition and FEC? But the primary responsibility rested with the Board, the Treasury, and the Minister. And if we can’t count on more honest and straightforward behaviour from those charged with monetary stability and the regulation of our financial system, or more effective scrutiny from those responsible for safeguarding the public purse, things are even further gone than this pessimist had come to fear. Mistakes will happen, but then the question is whether those in a position actually take them seriously and do something. There is no sign Nicola Willis has done that (after all, all those board members are still in office, and although their bid was cut back there were no consequences for them for the havoc they wreaked or the ethically-challenged try-on).

The second part of this post skips forward some months. But before we get to that take note of what the Bank and Quigley had done in the earlier section, hardly (one would have thought) conducive to good and trustworthy relationships going forward between the Bank and Treasury, if Treasury now realises they have to dot every i and cross every t, and check every single document that the Bank is not attempting to pull a fast one).

You might remember that a month or so ago I reported what an apparently well-informed insider had told me about what really happened around the Orr departure. Pretty much all of that story has checked out as things unfolded. One element of the story was that Neil Quigley had gone ballistic when he learned that Treasury had kept a fairly full file note of a critical meeting held on 24 February between the Minister of Finance, the Reserve Bank, and the Treasury. So I lodged an OIA request with The Treasury, and this was the response

Treasury response to OIA request re 20 and 24 RB meetings

From it

Personally, having taken many file notes of meetings with Ministers of Finance and Treasury earlier in my career, neither the fact of the file note nor its contents seemed particularly surprising or inappropriate. Major issues (not just the funding agreement but bank regulatory ones) were being discussed, the language is not inflammatory – although the Orr walkout (itself described in muted terms) certainly was.

The fault here seems (and not surprisingly) all with Quigley. As ever with him, there is never a sense of why the Official Information Act exists, or whose interests it is supposed to serve. Instead, we get implied threats of (a) “this will require the full force of RBNZ legal advice to be brought to bear on it”, and b) the suggestion that release would “immediately destroy the goodwill between Treasury and the Bank that I have tried to create over the past few years”. You might wonder how Quigley is feeling now that the full file note has been released, but even set that to one side……goodwill????? This was the same Board chair whose chief executive had behaved so egregiously in a meeting with Treasury that Quigley had felt compelled to provide a written apology, and whose Governor (in that 24 Feb meeting) had (in muted Treasury language) “expressed frustration at the relationship between the RBNZ and the Treasury”. And this was the Board chair who had pulled the wool over Treasury’s eyes by agreeing to a budget for 24/25 quite out of step either (and more importantly) with his own Funding Agreement, or with the spirit of government fiscal policy last year, and then used that abuse as the base for a bid for a big increase in authorised spending for the coming years.

Quigley then puts one of the Bank’s attack dogs, their General Counsel, onto the issue and we have his crucial email as well

So, the Bank’s General Counsel tries to threaten Treasury that the Bank would not in future be willing to hold meetings with Treasury and the Minister of Finance on its future funding? Yeah right, but it is an attempt to intimidate Treasury.

And then, of course, there is that second paragraph. Which goes to the whole point, that the Reserve Bank’s Board appears to have engaged in attempts to make end runs around any serious public scrutiny, including via the OIA, by doing sweet-heart deals with Orr, the terms of which they also refuse to disclose. Fortunately, sweetheart deals done by Quigley et al don’t bind The Treasury, without whom it seems we would have no idea what went on at that critical meeting, when things were so bad that within 24 hours the exit process was getting underway.

Quigley repeatedly displays no regard for the public interest, and any relationship to the truth or straightforwardness on Reserve Bank matters seems entirely incidental (ie whether or not it serves his ends of the moment – see the repeated active misleading of the public, both on 5 March and since).

And, just briefly, one final OIA, this time from Willis herself.

My informant had told me that on the afternoon of 5 March there had been heavy pressure from the Minister’s office for the board chair (Quigley) to do a press conference on the resignation. One of the Bank’s earlier OIAs had also mentioned such approaches. The Minister’s response confirms that there were two conversations that afternoon involving her Senior Press Secretary and the Bank’s communications head to that end, and it also releases the draft press release and Bank comms plan that Neil Quigley had provided to the Minister’s office late on the morning of 5 March which included this: “Recommended media response plan for if [ “if”???? Really?] we get questions: No further comment”. The ill-fated press conference, at which Quigley did so poorly and actively misled the public, was clearly Willis’s initiative.

But that was not my main interest. I also asked for copies of “any material relating to exit conditions for Orr (process or substance)”. The Minister’s response was “No information about the Reserve Bank Governor’s exit conditions is held”. Which really is inexcusable. As a reminder, the Minister (and Cabinet) appoints the Governor, the Minister (and Cabinet) are the only ones who can dismiss the Governor, and the Governor’s resignation has to submitted to her specifically. The Minister is also responsible for the Board, and appoints – and can dismiss at will – the Board chair, and is the only person in the entire mix with any degree of direct public accountability. And yet we are expected to believe she is so incurious as not to enquire at all as to what sort of cover-up arrangements Quigley (and the “senior counsel” both sides engaged) was cooking up with Orr, as the basis for his departure, or even at what cost. And when a key precipitating event was a meeting she was part of?

I’m not sure I really believe it – not “holding material” is likely to be different from no phone calls were made, directly or indirectly, (and there is set of texts involving Iain Rennie on this topic that are still being withheld in full by Willis) – but if it is true it reflects very poorly on her as a steward of the public interest.

(And that is even granting that the wider public interest was almost certainly served by Orr’s departure, a couple of years after he would already have gone had the previous government not, inexplicably, reappointed him.)

One more Treasury OIA about RB spending

Michael Reddell Adrian Orr, Funding agreements, Reserve Bank Board, Treasury

All the interest in the Orr-departure story – the background, and the subsequent and ongoing efforts to mislead the public by the Board and the temporary Governor – seems to now centre on the Ombudsman. Various people, including me, have appealed the Bank’s OIA obstructionism on specific requests and the Ombudsman seems to be pursuing the issue reasonably expeditiously. I received a draft of a provisional opinion the other day for comment (which I have now provided extensive comments on) but I’m guessing it might be a couple of weeks before we get a final decision. I’m going to be away for a while so I don’t expect to write anything more after this post for at least a couple of weeks.

For the record, the Herald has an article today on the Reserve Bank staff cuts. Most of it is ground covered in my post last Friday. But the one bit that caught my eye was this

To which there are so many possible thoughts in response:

  • Surely no serious external observer ever thought they needed what they had bid for to do their statutory duties effectively,
  • But if the Board is now confident that everything can be done with 20 per cent fewer staff than they had in January, why did they ever bid for so much more money?  (And it was the Board’s bid, perhaps championed by the then Governor but he was their agent and they had responsibility for governance, budgets etc),
  • And if “no work programmes have been cut” [“out altogether” appears from context to be the intended interpretation] a) what were all those people previously doing? and b) given all the non-core stuff the Bank got into under Orr, why on earth not?
  • It seems like further evidence that the modest cuts Willis imposed relative to what Grant Robertson had allowed the Bank to spend did not go anywhere near deep enough.

And it remains extraordinary that none of the Board members has had the decency to resign and that the Minister continues to express confidence in the chair, whose signature had been on that egregious bid late last year for so much more money, in which he and the Governor stated that that increased funding was what was appropriate “to deliver on our mandate and agreed outcomes”.

So many puzzles and so few explanations when it comes to explaining the last 10 months or so of the Orr tenure, that all ended so ignominiously on 5 March, coverups and all.

But another OIA response came in from The Treasury yesterday (having taken the best part of two months to provide two pages of information (and not withhold or redact anything)). Another of the puzzles around that final year or so is why Treasury appears to have been doing its monitoring role of the Bank so poorly (and this is a formal monitoring role, for which resources are formally allocated, established under the overhauled Reserve Bank Act in 2021).

This had been the request, lodged on 16 June

Some of this had already been overtaken by events because the Reserve Bank had already released to me Treasury’s comments on the draft 2024/25 Statement of Performance Expectations (SPE), and then had released the draft SPE and covering note the Bank had sent to the Minister of Finance.

The mystery, you will recall, was that the Bank had chosen to spend about 23 per cent more in 24/25 on matters covered by its Funding Agreement than the variation approved by Grant Robertson just before the 2023 election had allowed. Surely, it seemed, Treasury and the Minister of Finance would have pushed back strongly on this? But it emerged – all documented in previous posts – that the Bank simply chose to leave out the planned budget numbers from the draft SPE they consulted the Minister on. She simply wasn’t told about this planned excess, and Treasury had not flagged any concerns to her (they’d noted that the draft SPE didn’t have the budget figures in, but raised no particular concerns and simply noted that the numbers would have to be in the final version). They were, but there was no particular reason for the Minister or her office to look closely at the final version because they’d not been alerted to any particular areas of concern, or requested any major changes to the draft. As I’ve noted before, perhaps the Minister and her advisers should have been more suspicious – Willis had scarcely been on record as an Orr fan – but the real fault seemed to lie with Treasury. They are, after all, supposd to be the guardians of the public purse.

So what new do we learn from yesterday’s release? Mostly, it is about gaps – and not in what they released, but in what work never seems to have been done.

There were four limbs to my request.

On the first, it seems that there was no additional analysis or advice internally, and certainly nothing documented outlining any concerns as to what the Bank might be up to or suggesting (say) that they should insist that the Minister was alerted to the planned budget for 24/25. There is no sign in any of the material that Treasury was even aware of the scale of the planned spending blow-out, let alone suspicious of how such a blowout might be used to try and leverage more resources in the forthcoming Funding Agreement bid.

The third limb related to something I’d spotted in this year’s government Budget documents.

A not inconsiderable chunk of the “savings” in this year’s Budget ($144 million in fact) was this item. We were told, reasonably enough, that the figures now included in the 2025 government Budget reflected the new Funding Agreement that had been signed and released in mid-April. But why had figures so much higher ever been included by Treasury in the HYEFU last year? After all, much higher numbers had no warrant in any document any minister had ever seen (eg the draft SPE – see above) or signed (eg the Funding Agreement then still in place covering the period to 24/25). Why, in an environment of fiscal stringency, had Treasury included levels of Reserve Bank spending for the next few years far higher than anything authorised from the centre to that point?

The answer, it appears, is that no one bothered to look or check or think. Treasury told me that “there is no material in scope of the third part of your request”. And went on to tell me that “we note that the RBNZ provides the Treasury with operating expenditure forecasts which are used in the Treasury’s Half Year Economic and Fiscal Update (HYEFU)”. Which seems almost beyond belief. The Bank isn’t a tiny entity (say the Walking Access Commission), but one spending a couple of hundred million dollars a year, and one which had been increasing its spending substantially, and yet Treasury staff simply took whatever the Bank told them it planned to spend for the following few years and stuck it in the formal fiscal forecasts without apparently raising any questions at all. Not exactly a fearsome (or effective) watchdog.

One reason I’d asked about those HYEFU numbers is because I knew that the Bank had lodged its egregious bid for the following five years with the (acting) Secretary to the Treasury on 13 September. I’d assumed that between then and when the HYEFU fiscal numbers were finalised (27 November) somebody at Treasury would have (a) looked even a little closely at the Funding Agreement bid, and b) raised some red flags about a bid that used as a baseline spending levels so far ABOVE what was allowed in the still-current Funding Agreement, and c) perhaps (optimistically) gone back and looked at how the 24/25 budget had been set relative to those Funding Agreement limits. They might even have alerted the Minister.

And that was the gist of the second limb of my request. In fact, it appears that none of this happened. Treasury never actually responds directly to that bit of the request but (a) does not say it is withholding anything, and b) notes that two documents are in scope and soon to be released (as part of the long-delayed pro-active release of papers relating to the 2025 Budget). The first of those is “T2025/3027 Aide Memoire: Preliminary assessment of the Reserve Bank of New Zealand’s funding proposal for the 2025-30 Five Year Funding Agreement”, and is dated 13 February. That appears to be the first time anyone at The Treasury had put anything in writing on an egregious funding bid they’d received five months earlier (from an agency with a chief executive who was well known for his aggression etc). It seems almost unbelievable, but there it is.

I am loathe to accuse Treasury officials of playing fast and loose with the Official Information Act, but in this case it is hard to believe I have been given a straight answer. Why? Because we have the written words of the former Governor to his senior leadership team, cc’ed to the Board chair and deputy chair. This, from 5 February, is from the Bank’s 11 June release

You don’t tell people to “cease and desist negotiating with various Treasury Officials” if there had been no discussions and negotiations. And you don’t pull down your initial bid (see second to last line) if there’d been no prior reaction from Treasury or the Minister, and it is hard to believe that Treasury had put nothing at all in writing prior to then (and had not let the Minister know there was a looming issue).

But I guess it is plausible that no one much at Treasury had turned their minds to Funding Agreement issues for months after receiving the bid. Which doesn’t reflect well on them at all.

The fourth limb of my request covered any material of substance relating to Funding Agreement negotiations from 1 December until the date the Cabinet paper was lodged (1 April as it turns out). I’d narrowed the timeframe because I’d assumed there’d have been initial reactions earlier (after 13 September) but what I was interested in was the stuff that had led to the blow-up with the Governor). Treasury does not directly respond to this limb of my request either, but lists another paper soon to be released, dated 13 March (ie post Orr), a formal Treasury Report on funding agreement issues. And that is all. If Treasury’s responses are at least approximately truthful, it seems that they were very late in getting onto this set of issues (either future Funding Agreement bid, with its artificially high purported baseline, or the 24/25 budget itself, which had blasted through the then Funding Agreement limits).

If so, one might – just possibly, and in a mood of charity – be marginally less unsympathetic to the Governor. Perhaps he really thought he was going to get away with a) the massive 2024/25 overspend, and b) the artificial baseline for the new Funding Agreement. After all, it seems there had been no Treasury challenge or scrutiny at all, and his numbers even seemed to have found their way into the official fiscal forecasts with no challenge or question. It is astonishing that for months – dating all the way back to that draft SPE – there seems to have been no serious pushback, from the Minister or from Treasury. What sort of job were top Treasury officials doing in monitoring this powerful Crown agency? Not much of one it appears. Deputy Secretaries (both now out of the jobs they held then) are recorded as having turned up for chats at Board meetings, but what of it if excess of this sort was allowed to roll on for months unchallenged?

It is always possible that the way my OIA requests were drafted means something of significance has been able to be withheld as not quite falling within the specific scope of those requests. It is certainly difficult – nay impossible – to believe that there was nothing at all prior to 13 February. But it certainly doesn’t look as though Treasury was doing its job in a way citizens, let alone the Minister, might have reasonably expected that they would be.

One in five roles could go at the Reserve Bank

Michael Reddell Funding agreements, Reserve Bank, Reserve Bank Board

That is the headline in a story in The Post this morning. After inquiries from Post journalists a Reserve Bank spokesperson said that final decisions on organisational change, advised to staff last week, would mean a net loss of 142 jobs (35 of which were currently vacant; presumably the Bank has had some sort of hiring freeze in place for some months now).

The last public number we had for Reserve Bank staff numbers was in the Minister’s Funding Agreement Cabinet committee paper: 660 FTEs as at 31 January. Presumably a) there were some vacancies even then, and b) the number of jobs was greater than the number of FTEs, but even if there were 700 filled or unfilled jobs in January the recent decisions would still be a cut in excess of 20 per cent. That is brutal in any organisation, especially when its statutory roles and functions haven’t changed a jot. It is hard to imagine morale is particularly high in the Bank at present, and we might even sympathise with the more junior of the staff losing their jobs, especially those hired in the last year or two, really on what amounts to false pretences. Even those (probably a minority) doing useless jobs far beyond the scope of the Bank’s actual statutory functions.

You don’t really expect junior hires to a core government agency to have to do due diligence on whether that agency was running spending levels – and hiring plans – far in excess of what had been approved for them by the Minister of Finance. But that is what had happened: Board approved spending last year was 23 per cent higher than what the previous Minister of Finance had approved for 24/25 when he increased the Funding Agreement amounts just before the last election. Treasury didn’t seem to have noticed, or done anything to call it out, so one can only sympathise with new hires now being thrown back onto the job market.

And you can see how last year’s excess created today’s problems. The number of FTEs increased from 601 to 660 between 30 June last year and 31 January this year. Had they not gone on that last hiring binge, adjustment now would be much less painful all round. This table, showing FTE numbers, is from the 2023/24 Annual Report published last September.

It is a reminder of how rapidly Orr and Quigley had been ramping up staff numbers, with no substantial change in functions. Cut FTEs by 20 per cent from that 31 January level (660) and it would take the Bank down to 528 FTEs, at which point it would still be larger than it had been on 30 June 2023, the final balance date under the previous Labour government (under whose term almost all agencies had seen rapid growth in staff numbers). It makes the point that the cuts the current Minister of Finance approved have not been deep at all relative to what was going on (spending allowances, staffing) on Labour’s watch. (I reckon the Bank’s core functions could probably be done professionally with 350 staff, but save that debate for another day.)

One way of seeing this is to look at the Bank’s total operating expenses. In the final budget approved during Labour’s term, the Bank budgeted to spend $212 million in total operating expenses in 2023/24. For 2025/26. the recently published budget for total operating expenses is $204 million, 3.8% lower than in 2023/24. Add in, say, 5 per cent inflation over the two years and you are still looking at a real cut of under 10 per cent. Not easy to adjust to perhaps, but not very different from what a lot of other government agencies have experienced. The wild card of course was the budget for 24/25: $231 million. This year’s budget is about 14 per cent lower than that in real terms. But that 2024/25 budget never had any ministerial authorisation at all.

Another, but murkier, way of looking at it is to look at approvals under the Funding Agreement (which cover a – changing – subset of total operating expenses, but which are where the Minister of Finance is supposed to have control).

In the August 2023 update to the last Funding Agreement, Grant Robertson approved the Bank spending $149.44 million on in-scope operating expenses. In addition, they were explicitly allowed to spend on these items about $5 million of the amount that had been allowed for currency issuance expenses but which wasn’t needed for that purpose. So, say, $154,5m on in-scope operating expenses.

In the new Funding Agreement approved by the Minister in April this year, total in-scope operating expenses allowed for this year is $155 million (dropping away to $145 million next year, for reasons not made clear in the documents published so far, but maybe reflecting upfront restructuring costs – redundancy payments now for all those losing their jobs, already some weeks into 25/26?).

But you can’t just compare and contrast $155 million with $154.5 million because in the new Funding Agreement more spending items have been moved out of scope, not required to be covered within that $155 million limit. There are some smallish items (eg costs associated with the Bank’s legacy superannuation scheme, totalling probably less than half a million this year). But there is also this

Remember, these are business case costs, not some full cost of a project but you’d think they might easily total another million or two (consultants don’t come cheap).

And there is this explicit carveout, with some numbers

ie $5 million a year

Add those three items back in and the appropriate comparison to last year’s Funding Agreement level (the $154.5 million) is perhaps more like $161.5 million ($155 + 5 + 1.25 + 0.25). It drops away next year, but taking $10 million off that total still doesn’t leave them much less than the $154.5 million they were allowed for 24/25. The big problem – for them – is that they simply ignored that 24/25 limit and went for broke, hoping they could trick the Minister into setting them a permanently higher new baseline level of spending. It didn’t work fortunately. In a decent world they’d all (Orr, Quigley, the rest of last year’s board) apologise to the Minister, to the public, and to their own staff. In our world, staff lose their jobs and Quigley and the board keep theirs.

It is still interesting that they are needing to make such deep staff cuts to meet the budget and stay within the new Funding Agreement limits. Perhaps one partial reason might be the big new commitment they made to office space in Auckland – in what is apparently one of the fanciest new buildings in Auckland, with a five star green rating as well – on a scale which to have been anything like justified would have required even more growth in staff numbers. They signed up to that 4800 square metres last November, with no idea where the Funding Agreement would land and knowing they’d already well-overreached the previous Funding Agreement limits. According to last year’s Annual Report they spent $1 million on Rental and Lease Expenses (presumably mostly/wholly on their existing office space in a 40 year old building in Queen St). Not exactly a source I’d rely on for much but Google’s AI overview suggested that annual lease costs on the space in the new building could be $3.5 million (and their lease there runs from 1 August, while the existing lease doesn’t expire until 31 December).

In concluding I want to come back very briefly to the Post article. It is right to say that the Bank got much less than it had had the gall to ask for (unlike Oliver Twist, in asking for more they were already bloated), but what they are allowed to spend this year and next isn’t much different in real terms than what Grant Robertson had allowed them when he’d set the spending limit for 24/25. It is just a shame – actually, it should be scandalous – that they chose to ignore that limit so egregiously. Taxpayers and their own staff now pay the price.

Reserve Bank bits and pieces

Michael Reddell Funding agreements, Reserve Bank Board

Various bits and pieces have emerged from the Reserve Bank in the last couple of days; two in the form of other people’s OIA requests, and one in a partial response from the Bank to one of mine lodged with Treasury.

First, bullying. Someone, who must have had some knowledge of what was going on, had lodged a request for this information

Perhaps the Bank is turning over a new leaf on OIAs, as the request had only been lodged on 17 July and not only did the response go back to the requester on Monday (4 August) but they put it on their website that day (the Bank is quite selective about which responses they post, and there are often quite long lags). In fact, I just noticed there is another response – to a request lodged on 24 July – sent today and posted on the website today. If this really is a change of heart it is excellent news.

Anyway, the answers were interesting, to say the least

In the words of one former colleague, those payouts were “startling”. The 20 staff being spoken to seems a lot too, but who knows quite what standard they were using. Perhaps someone had spoken disrespectfully of the tree god, or suggested that the Bank really should have stayed within its allowed Funding Agreement spending limits? But to actually write cheques, hand over money, things must have been quite serious, even in an organisation not recently known for its budgetary discipline.

We know nothing more at this stage (amounts, specific reasons, who was responsible for the behaviour for which the ex gratia payments were made). To be entirely literal it isn’t 100 per cent clear that all the payouts were for bullying (the request covers any ex gratia payments to staff), but they probably were, given that the Bank headlines the entire response “Information about Bullying” and would have had an incentive to minimise the bullying dimension if there really were other reasons for some of the payments. Were the payments made before or after Orr left, and were any of them on account of his behaviour? I gather from Twitter that someone has lodged a further OIA so perhaps we will learn a bit more in time. But it doesn’t look good – and cases rising to level of payout must only be the tip of an iceberg, as some people are likely to be reluctant to lodge complaints, and others may simply have left the organisation.

The second OIA was about the new Auckland office (also only lodged on 24 July). You may recall that my source had indicated that the Bank had signed up to a fancy new Auckland office of a size probably inconsistent with the looming budget cuts. The Bank’s response seems to broadly back that story. The new lease agreement was signed on 4 November 2024. By that time (and as far as we can tell at present) the Bank did not know that its approved spending levels would be cut a long way back from what they had bid for when they lodged their next five year Funding Agreement bid in September. However, they were well aware that they had gone out on a limb, adopting a budget for 24/25 that was 23 per cent in excess of what they were allowed by Grant Robertson for that year under the Funding Agreement then in place, and had sought to persuade the Minister and Treasury that any (modest) cuts should be only from that unauthorised high “baseline”.

And while they may have needed a new Auckland office, this was the new space

and this was what it was to replace

In other words, they committed to more than twice the floorspace, in a more up-market building, at a time of general fiscal stringency and when they had no particular reason to suppose that they’d be allowed to keep growing. I’m not a property person but it seems that 10-15 square metres per head is about normal for typical open plan office

So it looks as though the Bank had gone lavish on the per capita floor space even if the new office was to be fully occupied at some point in future (which would have been a lot larger scale than the 164 staff and contractors they had in the Auckland office as at 30 June).

It seems a lot like a cavalier use of public money, made even worse (than their general budget excess) by the no-doubt multi-year nature of the property lease. But perhaps they’ll be able to sublet some of it?

And that spilled over into the third OIA response, that turned up this afternoon. It was part of a request I’d lodged with Treasury a couple of months ago which they’d transferred (that part of) to the Bank, and covers some late-in-the-piece material from the Bank to and from the Minister on Funding Agreement matters, after Orr had left. To be honest, I didn’t even think this material was in scope, as I’d been looking for Treasury material. As it happens, when I read what came in, parts seemed familiar, and I realised they’d already released these particular documents to someone else a month or so ago and I’d used a couple of bits of it last month (end of that post). But I hadn’t looked that closely then, and the significance of other aspects is also more apparent now.

First, last Friday I highlighted the way the temporary Governor Christian Hawkesby appeared to have actively misled FEC on where the initiative lay for the review the Bank now has underway of bank capital requirements. He played down any ministerial involvement claiming it had been just a Bank decision to do the review. That it clearly wasn’t was pretty evident from the Treasury filenote of that 24 February meeting between the Bank, Treasury and the Minister.

But to reinforce the point, here is Neil Quigley writing to the Minister on 16 March basically pleading (successfully) that she not accept Treasury’s view of how deep the cuts to operating expenses should be. This was the paper in which he pleaded that the Bank’s “culture” had evolved in light of the fiscal excess of recent years and that it would take time to change the culture and save lots of money. But he also said this

Hawkesby actively misled FEC. Once upon a time that sort of thing mattered.

Where Quigley was largely unsuccessful at this stage was around the capital budget (not something I’d previously paid any attention to). The initial bid last September had been for $50 million over five years. At this point Treasury was proposing $26 million (which, assuming the numbers in the Minister’s Cabinet paper are comparable, was 12 per cent less than total expected capex for 2020-2025). Here was Quigley’s plea

Note that first item. If you’ve just rashly signed up to big new offices in a fancy building the fit out costs (for a lease that commenced on 1 August 2025) were likely to be large.

Quigley’s capex plea failed, and the Minister ended up agreeing to allow them only $26.3 million of capex over the full five year period. This is the annual phasing.

Which might suggest that they will be spending something close to $10 million on the fit-out of a new office that they simply shouldn’t have signed up to before they had any clear steer about the future. The 25/26 number ended up a bit higher even than the $13m Quigley had sought on 16 March – new estimates of fit out costs? – with the capex allowances for future years being slashed. (If Quigley’s plea is even roughly accurate you might wonder how sustainable all this proves – presumably the Bank will spend all its opex allowance, and perhaps they reckon they’ll come back cap in hand in a few years’ time, or degrade the existing capital and wait for the next Funding Agreement negotiations. Or Treasury might be right about what they need.)

The final observation from these papers is perhaps not of any great moment, but it is puzzling nonetheless. You’ll recall that the Bank had gone ahead and set a budget for 24/25 far in excess of what the Funding Agreement had allowed. There was never any serious suggestion that the Bank was allowed to carry forward earlier year underspends, use it all for a last year splurge, and then try to use that new level as a baseline against which any modest cuts should be set. But that is how Orr, Quigley and the rest of the board had operated (quite explicitly – it is in the Board minutes and the September 2024 Funding Agreement bid).

There are problems with the Funding Agreement model, which involves setting annual spending limits five years ahead. Sometimes it is hard to know when a particular cost might arise. So it probably does make sense – if this model is stuck to – to allow scope for some flexibility. It is there anyway – no one gets fired for going a bit under or over in any year (and isn’t formalised like a parliamentary appropriation), and there is always scope for a renegotiation mid-stream (as there’d been in 2023). But the Bank was keen to formalise something. I noted in a post last month that in that 16 March paper the version of the draft agreement the Bank submitted involved a model in which Treasury could agree to modest variations (up to about 10 per cent) and anything more required the Minister.

I’d noticed that the Minister must have said no to that as the final document on the Bank’s website provided only (and appropriately) for this

I included the signature block because what I hadn’t noticed before – hadn’t read to the end of the set of documents, which looked like they were just repetitions and admin paperwork – is that she seemed to agree to this only after she’d already signed up to something like what the Bank wanted.

In that OIA response there was this

All signed and dated and a scanned version sent back to Bank by one of the advisers in the Minister’s office, in a email of 10:14am on 8 April.

We are left wondering what happened. Quigley’s memo of 16 March did not touch on the variation issue at all. Was the Minister not made aware of it, including by Treasury, until the very last minute, or was she aware all along and very belatedly chose to take a harder line? Fortunately she did finally land on the best approach, but how? The original OIA to Treasury, lodged back in June but due shortly, may shed some light, but it just doesn’t look like a particularly smooth or adept end to the Funding Agreement process. And I wonder what Quigley, Finlay, and Hawkesby made of the latest, last, loss………..which couldn’t have happened to a more deserving bunch given their egregious bid six months earlier.

As for me, I guess I should read OIA responses – even other people’s – a bit more closely.

Still waiting for a Governor

Michael Reddell Reserve Bank, Reserve Bank Board, Rodger Finlay

Today, 5 August, is five months since the shock resignation – or, as now seems much the most likely, engineered exit – of the then Governor of the Reserve Bank, who disappeared from office that very day, getting generously paid for several more weeks but not working until the official date his resignation became legally effective, 31 March. Since then we’ve heard not a word of explanation from him and (more importantly, since they are still public officials) have been deliberately, actively, repeatedly, and still to this day obstructed and mislead by the Reserve Bank Board, notably the chair Neil Quigley, enabled by the Minister of Finance, and implemented (in respect of OIAs) by the temporary Governor, Christian Hawkesby.

Applications for the position of Governor closed a couple of months ago, so I guess we must assume that the selection and recommendation process is now fairly well advanced. The Board established a Governor Search Committee

Being chaired by Rodger Finlay – who has no background in macroeconomics or regulatory policy, and who had a questionable start to his time with the Bank (still chairing the board of the company that owned the country’s fifth largest bank) – doesn’t inspire much confidence. And if Finlay appears like a decent general corporate governance type of person, recall that he has been deputy chair through a) the reappointment of Orr, b) the Board approving the Bank running spending levels last year far beyond what the Funding Agreement had envisaged or allowed, and c) (and so we learned yesterday) was part of the Board that allowed management to sign a new lease on Auckland offices last November, massively larger than the current office, with space for many more staff than they currently had, when i) the Bank was already spending more than their Funding Agreement had allowed, and ii) they (presumably) still had no real steer from the Minister of Finance as to what approved spending for 25/26 and beyond was going to be. [Oh, and he’s been party to the cover-up of the last five months.]

Quite a team he and Quigley must make. Not exactly a team to inspire any confidence in the wisdom of whoever they end up putting forward as a first nominee to the Minister of Finance, or a team that might assure a good potential Governor that he or she was going into a well-led governance structure. Responsibility for that is shared by those Board members and by the Minister of Finance who has continued to express confidence in Quigley (for reasons not comprehensible to anyone outside her bubble) and refused to proactively ensure vacancies were quickly filled by new able people.

We had a Governor resign once before. Don Brash announced his resignation and left office on 26 April 2002. Just under four months later, Alan Bollard was announced as the new Governor.

Defenders of the Board and Minister might point out that things are a little more complicated this time. By law, the Minister now has to consult with the other political parties in Parliament (in practice the Opposition parties, since the coalition parties will already have been involved through the Cabinet appointments process).

The law does not require the Minister to change her mind if the other parties (some or all) disagree (perhaps strongly) with a nomination, although the statutory provision would be empty if she did not pay at least some heed to concerns expressed. (There is no sign Grant Robertson did – and it was his new provision – when he went ahead and reappointed Orr, over objections from both ACT and National in late 2022, but if the provision is to have any meaning at all, you’d hope there would be some serious reflection on any objections, especially when an incumbent is not involved.)

However, if the paper work is a bit more time-consuming now than it was in 2002, bear in mind that the appointment of Bollard was accomplished in less than four months even though Michael Cullen had rejected the Board’s initial nomination.

By law (see above) the Minister and government can only appoint someone the Board recommends. But that does not mean that the Minister has to accept any particular recommendation. That isn’t the empty provision people sometimes suggest. There have only been three new Governor appointments since the legislative model came into effect (in 1990) and Michael Cullen recorded in his autobiography that he rejected the then Board’s nomination of Rod Carr (deputy and at the time acting Governor).

As was his perfect right to do. (The Board must have at least half-expected their nomination to be rejected as it was understood among senior management at the time that Helen Clark had made clear that she wasn’t going have any “Brash-clones” appointed.) I’ve long championed the much more conventional model in which the Minister gets to appoint their own preferred person as Governor directly (perhaps accompanied by scrutiny hearings by FEC before the person actually takes up the office).

But it was all done in less than four months, and it is now five months and counting since Orr left (and the Bank in 2002 was in nothing like the mess, or urgent need of new strong capable respected leadership that it is now). I hope the Minister is drumming her fingers and urging the Board to get on with it.

Quite who they might come up with remains a mystery, or whether the couple of new Board members this year might persuade their colleagues that whatever the Board has once seen in Orr he should be almost a benchmark antithesis of the sort of person who should be chosen.

I wrote a post a couple of months ago, shortly before applications closed, prompted by the advert for the job and what it suggested the Board might be after. As I have noted throughout, I don’t believe there is any obvious ideal candidate, and so inevitably compromises will have to be made (and in recruiting a person, the Board and Minister need then to have regard to the willingness and ability of the person to clean house and build a new and more capable second tier – we cannot for long be in a position where the deputy chief executive responsible for macroeconomics and monetary policy has (a) no background in the subject, and b) can’t intelligently comment on anything of substance other than from a script she has been given).

That said, straws in the wind aren’t terribly encouraging.

I’ve heard that a couple of very able applicants didn’t even get an interview (there is such an abundance of talent? Really?). And then there was media report (that I’d heard via markets people earlier) that a Bank of Canada Deputy Governor (they have many) was a strong possibility, perhaps even a frontrunner.

This would seem an ill-advised choice if it was really a direction the Board was considering taking. Gravelle seems to have no particular connections to New Zealand (other than a couple of conferences, one by Zoom), and comes from an organisation that – unlike the Reserve Bank of New Zealand – does not do banking (and non-banking) financial regulation and supervision, these days a big part of the Bank’s job. For all its undoubted analytical strengths, the Bank of Canada also has a quite different sort of monetary policy governance model (entirely internal) than New Zealand’s. And then there is the adverse selection issue: a person who was good enough to be a serious contender for Governor in his/her own country (G7 country and all that) would not be very likely to put themselves forward to be Governor of a much smaller, poorer, remote country’s central bank, a country with which they’ve had no particular ties. As a couple of people have put it to me, it is a bit reminiscent of the old imperial days – someone not quite up to being appointed Governor-General of Canada or Australia might still be handed down to New Zealand. And it is not as if parachuting in foreign appointees to top economic roles here has been a particular success story (see last two Treasury secretaries), nor in many ways was bringing back an expat after 15 years away to the Reserve Bank (even if Orr’s record makes Wheeler look less bad). Can we really have fallen so far that we can’t find a credible respected appointee at home?

Always possible I guess. Compelling choices certainly aren’t thick on the ground.

What of the temporary Governor, Christian Hawkesby? These were my comments a couple of months ago

Much of which I would repeat today. But unfortunately since early June we’ve seen not just that Hawkesby has been a part of the obstruction effort re Orr’s departure (and if he is working to Board direction the fact that he has not been willing/able to insist on a more open approach is a poor reflection on any claim he has to be thought a worthy occupant of the permanent role. And then of course there was that last sentence. We now know that not only did he repeatedly sit alongside Orr while he (Orr) mislead Parliament, but that Hawkesby himself misled them just three months ago. He proved unable to even pass that low bar I mentioned in June.

I ended that earlier post speculating on some possible sorts of names I hadn’t seen mentioned in any of the media articles (bearing in mind that the advert had talked of the importance of both financial markets knowledge and CEO experience)

Since Stobo is (a) an economist by training, b) has CEO experience, c) has financial markets expertise, and has been appointed to his current public sector role (chair of the FMA) by this government, and is a thoughtful and reflective person .you could see why he might be a strong contender if he wanted it (and was willing to give up his portfolio of directorships etc and media commentary). If one can’t have much confidence in the FMA, there’d definitely be worse people for the job.

But it is time to get on with it and get a new Governor in place. And then get on and refresh the Board, with a new chair to work with and oversee the Governor.

Orr, Quigley, and Willis: 31 July edition

Michael Reddell Adrian Orr, Reserve Bank Board, Treasury

I have other things to do with my time, but feel some obligation to my source – the (anonymous and unknown to me) person who seemed to take quite a personal risk, to help reopen the Orr departure story – to keep on making sense of developments, inch by inch as it often seems, in this story.

There are three things I wanted to comment on this morning, all prompted by yesterday’s release by Treasury of their internal file note of the 24 February meeting between the Bank, Treasury, and Willis.

  • an article in The Post this morning,
  • one on the Herald website last night, with further comments from Quigley, and
  • my own reflections on yesterday’s release.

The relevant section of the record of that 45 minute meeting is this

Post article

The Post article really isn’t worth linking to (you can no doubt find it if you want). It is noteworthy only for this extraordinary line:

“Hawkesby, and then Orr, left the 45-minute meeting shortly before it ended, but there is no evidence in the minutes that the discussion became heated.”

Which seems to ignore several things. First, the Deputy Governor is recorded as having left the meeting, but at the end of his item. He was the Bank’s senior manager responsible for financial stability and the first two items on the agenda (Prudential Regulation and Competition) were in his bailiwick, and he left when that discussion ended. He wasn’t a member of the Bank’s Board, and the Funding Agreement is between the Board and the Minister. He also wouldn’t have been one of the senior managers (CFOs and the like) providing technical/operational support on budgetary details.

Orr, by contrast, left in the middle of the Funding Agreement item. Moreover, Nicola Willis has confirmed (it is in the Herald piece – see below) that Orr “chose to leave the meeting early” (and she is likely to be phrasing that diplomatically). And Willis told Heather du Plessis-Allan several days ago that it was clear to her that emotions were running high in that meeting.

And, finally, I guess the journalist has never been a bureaucrat. Writing down that the Governor “expressed frustration” about the Bank/Treasury relationship is likely to be a very muted and diplomatic rendering of the summary of the actual words and the tone around them. An official writing up such meetings isn’t, say, a Bob Woodward looking to capture all the drama for publication. (Note that my source last week suggested that the account was still not muted enough for Quigley, who reportedly was very upset to learn that such a record existed at all and allegedly rang Treasury to complain in no uncertain terms – an OIA may shed light on whether that was so.)

It might not be going too far to suggest that a more accurate account might involve words like “stormed out”, walking out not only on the Minister but on his own board chair, having (so the account suggests) sought to undermine his own board by making a direct play to the Minister for his personal view of what the Funding Agreement level should be (recall that Orr was both a board member, and working under board delegations of authority etc on management and budgetary issues).

Herald article

The Herald article appears to have been prompted by yesterday’s Treasury release (they, like me, have had long running OIAs in with Treasury – theirs longer than mine – and this release was a partial response, while we wait for the rest of the issues to be addressed). But the article also contains quite a few comments from Quigley, apparently from an interview Tibshraeny did with him late last week after the Minister’s meeting with the Reserve Bank Board, as well as a fresh report that Willis had again expressed confidence in Quigley.

(It is to Treasury’s credit that they released both last week’s Quigley email (apologising for Orr’s conduct at a meeting with Treasury) and this file note. Either Rennie has decided that Treasury wants to be no part of the ongoing coverup and attempts to mislead by the Bank/Quigley, or (perhaps in addition) he has been encouraged in that direction by Willis, who seems to want more openness (and to be frustrated with the Board). If there are gag orders that Quigley signed the Bank up to they won’t bind Treasury.)

The article is behind a paywall so I’m not going to quote at length.

On Quigley, Willis is quoted as suggesting he is the right person for the job right now, including selecting a nominee for new Governor, and that at this “critical juncture” what matters is stability. It is pretty unbelievable, and utterly unconvincing stuff. The Bank is an embattled mess, and much of the mess is of Quigley’s own doing – spinning out the obstruction and misleading for months, overseeing the budget-busting spend up last year (that they’d not told the Minister about), and of course the appointment and reappointment of Orr in the first place. How can anyone have any confidence in a nominee out of a process led by Quigley? How could a good potential new Governor have any confidence in his chair? How can staff have any confidence in the board chair, when he is responsible for actively misleading them (as well as us) and for the big dislocations, layoffs etc the place is now going through? Rebuilding from here really demands a clean slate, led by someone commanding widespread respect and confidence.

But if the Minister’s line was perhaps predictable (you have to back someone until you fire them I suppose), Quigley’s comments were more interesting. He noted that the rest of the board had (we are told) expressed confidence in him – which perhaps isn’t unduly surprising as all but Spencer (new appointment) are as implicated as him in the events of recent months – but then must have been asked about the OIA obstructionism.

There has never ever been any sign that Quigley has any sort of commitment to openness or public scrutiny. The obstructionism, and reported quotes along the lines that he didn’t think the public had a right or need to know what went on (with one of the most powerful controversial officials in New Zealand), has to some extent been par for the course. But you did get the sense here that he feels the ground slipping away from under him. Most likely his staff gave him the sort of advice he wanted to hear on the law, but even if he got cover to hide there so far, it was a spectacularly bad call – in governance and public trust terms – to (a) be as obstructive as they’ve been (multiple OIAs have never been responded to directly, let alone completely) and b) to actively mislead the public repeatedly. No law required that. And any adviser who advised him that it was a good course of action shouldn’t be working there much longer.

In his final comments, Quigley seems to grudgingly acknowledge that his role included providing feedback to the Governor on his performance, but it is – on his telling – none of our business. He acts as if either Orr was some low level employee (say a junior accountant at Waikato University), or as if his responsibility is to the Bank and its management, rather than to the Minister and the public. And again, nothing warrants the calculated deceit of recent months, or attempts to substitute his judgement for the spirit and principles of the Official Information Act.

My thoughts prompted by yesterday’s Treasury release

A couple of additional thoughts occurred to me after reflecting further on yesterday’s release. The first (and probably not central) was this from their covering note.

The Bank had submitted its Funding Agreement bid to Treasury back in September 2024. Can it really only have been in early February that officials did even a preliminary assessment of what levels of spending they thought the Bank should be allowed? It seems odd, and yet in the papers the Bank released on 11 June in which an Orr email records him stating on 14 February “We have not heard from Treasury as to a preferred number”. It seems puzzling, but perhaps some of the outstanding OIAs will eventually shed some light.

But the bigger question is what we make of this episode of Orr’s extraordinary behaviour on Monday afternoon 24 February, in light of all else we know (or suspect). It must have been critical because, as I highlighted yesterday drawing from the Bank’s own 11 June selective release, within 24 hours various members of senior management were (a) aware an exit was a possibility, and b) putting together a working group to manage things at the Bank’s end. But, equally, it cannot have been final and determinative – except perhaps that Quigley and Willis may have concluded to themselves that Orr had to go (after undermining his board chair in front of the Minister and then walking out of the meeting, all only a couple of days after Quigley had had to apologise to Treasury for Orr’s conduct, because Orr himself wouldn’t).

I had a useful exchange yesterday afternoon with someone whose views always force me to think. This person argued that Orr’s behaviour in that meeting was tantamount to a resignation. I certainly agree that, on what we know, it was the sort of behaviour that shouldn’t be tolerated from any public sector chief executive, and there was no obvious way back from it (especially given the track record of Orr’s behavioural issues in the job, recent and past). But did Orr see it that way? Over the years he’d held the job he’d already gotten away with so much, and perhaps it is unlikely (to say the least) that it was the first time his undisciplined side had been on display in a Minister of Finance’s office. The Bank’s statement of 11 June may at one level have been accurate (if misleading)

“Distress” sounds like a reasonable description for what we now know of the 20 and 24 February meetings, and “necessary working relationships” must have been quite deeply impaired – but not just with the Board, but with the Minister and Treasury too – and Orr did finally come to a decision to go.

But there is still no sign that on 24 February he thought he was resigning, and every indication that his decision to go came only after quite a bit of pressure applied in the following few days. After all, recall my source’s story (and that person’s general account of what went on seems to have been vindicated so far where independent details have since emerged) that it wasn’t until 27 February that Quigley sent that Statement of Concerns to Orr, seeking a response (this wasn’t a quiet private chat, but something formal in writing by email), which seems to have been the final straw [UPDATE: Quigley probably also needed to get the rest of the Board squared away, who hadn’t witnessed Monday’s debacle]. And even then, if perhaps Orr wasn’t fighting too hard – it was clear he was going to lose the funding battle, and it clearly was close to his heart, and surely even he must have had some self-knowledge reflecting on his conduct over the past week – it was still a case of “senior counsel” called in by each side to negotiate, not a simple resort to standard resignation provisions in Orr’s contract, and getting him out of the office the very hour the resignation was announced.

Both Orr and Quigley will have known that it was most unlikely the Minister would sack him, and so he held leverage – I’ll go, but only if you sign up to a gag order (the limits of which, or the authority for which – did the Minister really not know? – are still not clear). He was clearly pushed, and there is no way by this point that the Board chair can have had confidence in Orr continuing (despite what he claimed on 5 March). Perhaps it was one thing to pledge that precise details of behaviour would not be disclosed, except as required by law (you can’t contract out of the OIA), but Quigley and Willis should have insisted on something like “After discussions initiated by the Board, the Governor has chosen to resign and left office today”. Except that – unless we see clear evidence to the contrary – perhaps they then preferred that we not know (and no one else on the Board seems to have objected). And so the obstructionism and repeated active deception of the public began, and continues to this day.

The Treasury file note of the 24 February meeting

Michael Reddell Adrian Orr, Reserve Bank Board, Treasury

A few minutes ago I had this email from The Treasury

This is the document that my source last week claimed Quigley went ballistic about when he learned of its existence,

Taking Treasury’s caveats re the views expressed by anyone including Orr, can we conclude at least from the description of events that Orr walked out of the meeting in the middle of the Funding Agreement discussion, having undercut his own governing board’s views in front of the minister and his chair?

Oh, and credit to The Treasury for releasing this in full now.

UPDATE: I just wanted to put the record out there rather than write much commentary. However, I’ve had a few people get in touch suggesting that the record is capable of a more benign (for Orr) interpretation, noting that the Deputy Governor, Christian Hawkesby is also shown as having left the meeting part way through. However, I don’t think this alternative interpretation is correct. Hawkesby is shown leaving at a natural break point, where the banking regulation and supervision discussion ends. His main role at the Bank at the time was responsibility for those functions. He was not on the Board and Funding Agreement issues were mainly a matter for the Board and chief executive (supported by other DCEs on the financial management side of the Bank), so it seems quite natural that he would have left at that point.

By contrast, Orr is recorded as having highlighted differences between himself (and management more generally) and his board, and then to have sounded off at Treasury (“expressed frustration” is an official’s record, not that of a fly on the wall biographer, so likely to be understated), and then is recorded as leaving the meeting while the Funding Agreement discussion is still going on. It has also been suggested that perhaps the Minister had simply asked Quigley to stay behind. That interpretation seems unlikely given that the Treasury team (and MoF’s office advisers) were all still there (a later one-on-one might not be a surprise, but Treasury officials would not have been there to record that).

In the end, we do not know with certainty, although either Willis or Quigley (or Orr for that matter) could give us straight answers (so could Rennie, but it isn’t his role to).

Rereading the material

Michael Reddell Adrian Orr, Reserve Bank Board

As I outlined in my post on Friday, it now seems that much the most likely explanation for the sudden no-notice departure of the Governor of the Reserve Bank is that he was ousted; not formally sacked by the Minister of Finance (as she might well have had grounds to do, but it could have got messy), but – having left himself vulnerable by his record of questionable conduct – engineered out by the Bank’s Board (more specifically its chair), almost certainly with the foreknowledge and acquiescence, and possibly the direct encouragement, of the Minister of Finance herself. If so, well done them on that count. But the subsequent and ongoing active deception of the public (and of the Bank’s own staff), and the apparent defiance of the Official Information Act, is simply inexcusable, and it would seem that the Board (especially the chair), the Minister, and the temporary Governor share responsibility, to one degree or another, for that.

Looking back now, it is puzzling that this hadn’t seemed the most likely explanation pretty much ever since Orr left on 5 March, or at very least since the Bank’s big release, and statement, on 11 June. I guess that is what comes of treating words out of the mouth of the Bank, and especially its chair, as having any degree of trustworthiness whatsoever. More fool me.

Recall that the first set of statements and Board chair comments on 5 March was clearly intended to lead us to believe there was nothing to see here. It was just a “personal decision”, there were no conduct, performance or policy issues at the heart of it, and really….when a big job was done, why wouldn’t an impressive leader take the opportunity to hand over the reigns. I won’t repeat all the things Quigley said that day, but this statement, issued by the Bank mid-afternoon on 5 March, after many questions had already arisen, rather captures the tone

Cincinnatus and all that. A couple of hours later he told the hastily-called press conference that he personally had still had confidence in Orr, and answered a direct question thus

The Bank spent the next three months blocking OIA requests and refusing to add anything, until the great reveal on 11 June. There was a set of carefully selected papers released (while avoiding anything on whole chunks of what must have gone on) and an official statement, presumably owned by both the Board and the temporary Governor and probably carefully vetted by lawyers (including ones for Orr?).

Having abandoned the 5 March story, this was all now carefully crafted to focus us on (a) that board meeting on 27 February, and b) a policy difference between the Board and the Governor which Orr, somewhat oddly, took so strongly to heart (“caused distress”) that he felt it would be better for him to simply go.

If you go back and read my posts when this release came out, you’ll see I never really bought the framing (which the Bank must have been pleased that much of the media followed) that this was a dispute over the Funding Agreement per se. As I have noted several times, many or most public service chief executives have suffered budgetary disappointment in the last couple of years, and none of them stormed off with no notice. But we were still clearly supposed to believe that whatever really happened, Orr had real agency (it was he who decided to leave, of his own accord, with no notice).

But there were still plenty of clues that it wasn’t the real story. There was, for example, the strident and repeated insistence by the Minister of Finance that it was all nothing to do with her, she knew little or nothing etc (even though she was the person responsible for the Governor, and to whom any resignation actually had to be addressed).

And there was the near-final version of the 11 June statement, which they’d sent out in error to OIA requesters shortly before the official general release time.

The shift from one (near-final) to the other (final) being clearly designed to remove any references to a meeting with the Minister and Treasury, and to draw attention away from them generally (and the earlier wording wasn’t going to have got into a near-final document of this magnitude by accident or the whims and failings of a junior staffer).

And there was the exit agreement itself, and negotiations being undertaken by “senior counsel” – interesting that that term was explicitly chosen by the Bank when they could easily just have used “lawyers” – for both sides. For an amicable departure, surely a quick chat with HR could have sorted out the application of Orr’s standard resignation terms, and any waivers of notice that might be sought or granted? And there was this summary (from the 11 June statement) of the exit agreement

Who typically has negotiated exit agreements? People being forced out (but not specifically fired). And Quigley has repeatedly referred to legal constraints on his ability to explain things, which can really only have arisen from the terms of this exit agreement, where Orr will have had some negotiating leverage (and were it all Cincinnatus-like there would be nothing for either side to want to hide – and no reason for Orr to have left the office the very day of the resignation, and yet be paid for several more weeks).

But things hung in limbo – hamstrung in part by the Bank’s obstructiveness over various OIA requests now having been appealed to the Ombudsman – until the account provided to me by someone who was clearly fairly close to events, and reported here. That person’s account was that (a) Orr’s behaviour had been very bad in a meeting with The Treasury on the Funding Agreement issues and then on 24 February in a meeting with both Treasury and the Minister of Finance, and that b) on the 27th, the day of the Bank’s board meeting, Quigley had emailed Orr a Statement of Concerns raising conduct issues stretching back several years and inviting a response. So the story went, at that point Orr decided to resign.

Treasury then disclosed an email sent by Quigley to a mid-level Treasury staffer after a meeting on 20 February apologising to that person that Orr had lost his cool in the meeting, in response to a perfectly reasonable question that Quigley acknowledged should have been anticipated and for which Bank management should have had a dispassionate answer. At a time when negotiations on the Bank’s future five-year funding were approaching climax Orr, in the presence of his chair, had (a) lost it with Treasury, and b) neither then nor later been willing to apologise himself (why otherwise was Quigley doing so, and not even on Orr’s behalf).

Then the Minister confirmed that “emotions were running high” in that meeting on 24 February too (around Funding Agreement disputes), while seeming to confirm that “employment negotiations” had been underway between Orr and the board in the days leading up to the resignation. And while the Bank has refused any further comment, they have also not chosen to deny any of it (including the alleged 27 February email, for which there is still no independent confirmation of its existence). Had there been no substance to any of this, they’d surely have owed it to both Orr and Quigley to (however briefly and tersely) set the record straight. They seem now to be hoping to wait out the Ombudsman.

And so the “engineered” ousting came to seem like the best working hypothesis for what had gone on. Perhaps on the spur of the moment, or perhaps lying in wait for some months, Orr’s conduct seems to have crossed the line (again – perhaps he’d been warned) and they had the leverage to get him to go. No doubt he was disheartened that he was going to lose the Funding Agreement fight and perhaps that made him readier than otherwise to go without much of a fight?

Anyway, having got to that point I decided to go back and reread that package of material the Bank had put out on 11 June, and see if any of it read differently in light of what we had since come to know.

I’d assumed – I think understandably enough – that the Bank’s Board meeting of Thursday 27 February might have been decisive. The 11 June statement seemed to point that way, as did my source’s report that the (apparently) decisive email had been sent to Orr on 27 February, and the fact that the only indications of advice to Treasury or the Minister had dated from then (I’ve now asked the Ombudsman to review the extensive withholdings in that release).

And perhaps there was some sort of final showdown then and a final decision made (to call in the “senior counsel” to negotiate exit terms). But the Bank’s information release pack included this (read from the bottom)

Who are the characters here? Hawkesby was (then) the Deputy Governor, McBride was (and is) the Bank’s General Counsel (but a third tier person, under an Assistant Governor who was also a lawyer), John McDermott was the Assistant Governor responsible for HR matters, and Naomi Mitchell was the (third tier) Director of Communications. And before 4:46pm on Tuesday 25 February [UPDATE: as it turns out, less than 24 hours after Quigley got out of that 24 Feb meeting] they already knew that something was afoot and agreed to the establishment of an “ad hoc committee” to help manage the situation. It seems clear that decisions had not yet been made (“If not just yet, maybe if events escalate.”) but this was two days before the Board meeting and just the day after that (“emotions were running high”) meeting with the Minister and Treasury. Was it Orr who told this group of his managers, or was it Quigley (Board chair)? We don’t know, but whatever had already unfolded – a serious risk of the Governor going presumably – was material enough for a range of key managers, not all direct reports to the CE, to have been brought into the picture (apparently separately/individually) this early. (This group then meets or exchanges messages over the remaining period pre and post resignation that was covered by the release.)

We don’t know what events were on the Statement of Concerns list Quigley is claimed to have sent Orr. As I noted last week, it isn’t as if he would have been short of examples just from material that had found its way into the public domain by then. But I wondered what other events might have been salient for the Minister and/or the Board.

I noted last week that when (with spectacularly poor judgement) Quigley and the Board had recommended Orr’s reappointment in late 2022 there had been this.

When this was first released some time back it seemed like little more than make-believe stuff. But perhaps it had been the basis for conversations with Orr at the time? After all, the Board (and Quigley) can hardly have been oblivious to the long list of concerns and issues, so perhaps there was some attempt at insistence on better behaviour in a second term?

If so, it didn’t go well. Even externally, Orr continued to mislead (or worse) FEC and media. As the Minister noted last week, she’d last year passed a complaint about Orr’s behaviour to a New Zealand Initiative employee to the board to address.

And we learned just yesterday that it seems that the Bank never told the Minister of Finance that they were going to budget in 24/25 for operational spending far in excess of even what Grant Robertson had allowed them for that year (although, to be clear, responsibility for that must lie with both Quigley – as board chair – and Orr, as CEO). Perhaps when Willis finally realised she had been had, she was (and I would hope she was) really annoyed and perhaps, as regards Orr, steel entered her soul (belatedly) at that point. Of itself, not quite dismissal material perhaps (after all, Quigley was responsible too and she’d just reappointed him) but enough to put you on watch.

Who knows if Orr’s conduct at and after those two February meetings was itself enough to lay him open to pressure to go. As yet, we have only quite sanitised comments on how those meetings went down (including the Orr/Wood exchange, where they were both trying to settle things down after the event) but it was repeated behaviour from a very senior figure within days, at a time when the Bank really need to maintain good relationships. If it wasn’t enough in itself, there was other stuff going on at the very same time.

Going back to that period, I realised that it had been on the very morning of 20 February – the day of that unapologetic blow up at Treasury – that Orr had been telling demonstrable untruths again to Parliament’s Finance and Expenditure Committee (at his appearance on the February Monetary Policy Statement). I wrote about it in a post on 21 February, “Orr at it again”. I went back through that post the other day, and listened again to the video of the hearing to check that I’d heard and recorded things correctly. It was, as it turned out, probably his last public appearance as Governor and I counted five outright misrepresentations (two I would go so far as to call worse than that), all on matters where the Governor was either well aware of the truth, or should reasonably have been expected to have known the truth. (And just to be clear that responsibility is shared: at the table with him were his deputy responsible for monetary policy, Karen Silk, and the chief economist Paul Conway. In the row behind Orr you can see Christian Hawkesby, MPC member and Deputy Governor, Naomi Mitchell (Director of Communications), and one of the external MPC members. Not one of them made any attempt to correct Orr on any of these points.

The most egregious of Orr’s claims that day – although not necessarily particularly consequential, just the easiest to unambiguously refute – was the (repeated) claim that the Reserve Bank had been among the first central banks to tighten (when inflation took off a few years previously) and the new, and even more out of step with reality, claim that the Reserve Bank had then been among the first central banks to cut rates.

In my post that day I observed

As I noted, he’d done this sort of thing often enough before, but when I checked my records it seemed to have been the first time since the change of government that he’d been caught in such flagrant attempts to mislead a parliamentary committee (there are plenty documented in the years previously). Had he been less bad for a while, or had I not been paying so much attention? I ended up raising this episode with the Finance and Expenditure Committee the following week (before Orr’s resignation), in time with full chapter and verse – as I recall, I thought it was pointless to raise it with Willis, but the FEC chair was new.

I don’t suppose this particular episode of egregious behaviour – which his senior team seemed to walk by – had anything particularly to do with Orr’s ouster, underway just a few days later. My point is only that if for whatever reason you think what we know of those two private meetings mightn’t really have been serious enough to use as a lever to oust Orr, there was plenty more behaviour that could have, this one visible to anyone who chose to watch/read. If Willis helped engineer the ousting of the Governor, she did us – and standards of public life in New Zealand – a service.

None of which – not NDAs, not nothing – warrants participation in active and repeated, ongoing now, attempts to mislead New Zealanders and obstruct scrutiny. And if – as the Minister suggests – she isn’t overly happy with how the Bank is now handing things, the Board chair serves at her pleasure. If she wants different standards, a good way to signal that would be to replace the chair, now.

If something like what I’ve hypothesised here is what happened back in late February and early March, perhaps the Board and Minister should have insisted on a terse statement along the lines of “Following discussions initiated by the Board, the Governor has resigned and has left office today” and said nothing more that day. It wouldn’t have stopped the questions, or the OIAs. Perhaps it wouldn’t have proved tenable, or Orr wouldn’t have agreed. But there is just no excuse for the deliberate repeated ongoing effort to mislead us.

Or their staff. This was from the package of Q&As sent out by Naomi Mitchell to the entire Bank second and third tier mamagement group first thing in the morning the day after the resignation, for use with staff.

Yeah right.