Strong candidates to succeed Bollard

Reserve Bank chairman Arthur Grimes or former central bank deputy Murray Sherwin could be strong contenders to replace governor Alan Bollard, who will step down later this year, former governor Don Brash says.

But there is likely to be a strong field to take on the $600,000-a-year job that Bollard, 60, is leaving after 10 years.

Arguably the most powerful post in the New Zealand economy, the governor has sole responsibility for setting interest rates. The central bank also plays a much bigger role in the supervision of the banking sector than in the 1990s when its key role was taming inflation.

Other leading candidates are likely to include existing Reserve Bank deputy governor Grant Spencer, a "strong contender", NZIER principal economist Shamubeel Eaqub said.

Another bank source agreed Spencer was in a good position to take over as governor given his role in charge of prudential oversight.

Assistant governor John McDermott was also expected to be a candidate. Both Spencer and McDermott declined to comment yesterday.

Another candidate is likely to be a former head of economics at the Reserve Bank, David Archer, who is now at Basle's Bank for International Settlements.

Brash, who led the bank for almost 14 years, said Grimes, though chairman of the board "could equally be governor and is a very competent monetary policy economist". The board was likely to want to consider Grimes "as one of the possibilities", Brash said.

Sherwin could also be a candidate, Brash said. Grimes became chairman in 2003 and has a huge body of economic research work, running to about 20 pages in his CV. He was tipped as a replacement for Brash as governor.

Grimes, 54, declined to comment yesterday.

Eaqub agreed that Grimes "ticked all the right boxes".

Sherwin, who is almost 60, also has strong credentials for the top job at the central bank. He served as deputy governor of the Reserve Bank till 2002 and led negotiations between it and the industry on a new approach to banking supervision in New Zealand.

Sherwin was seen as a frontrunner in 2002 when Brash left suddenly to go into politics.

But Sherwin had just taken the position of chief executive of the Agriculture and Forestry Ministry, which he held for nine years until late 2010.

As well as chairing the Productivity Commission, Sherwin headed the Canterbury Earthquake Recovery Commission, which was replaced by the Canterbury Earthquake Recovery Authority (Cera).

Two former Reserve Bank senior executives – Adrian Orr, now heading the New Zealand Superannuation Fund, and Rod Carr, currently leading Canterbury University – could also be in the frame, Brash said.

Orr, 48, has led the super fund since 2007, after leaving his role as Reserve Bank deputy governor. Orr was previously head economist at Westpac Bank and National Bank of New Zealand.

Carr, 51, is vice-chancellor at Canterbury University and was for several months acting governor of the central bank after Brash resigned.

Carr was responsible for financial system oversight at the central bank and keeping tabs on the banking system.

Bank of New Zealand chief economist Tony Alexander said a change of governor at the central bank would not lead to any great change in the operation of monetary policy.

But bank economists would look closely at "past utterances" of a new governor, he said.

As for Bollard's record, he could have lifted the official cash rate faster between 2004 and 2007, Alexander said.

"[He] could have done better, but since then with the recession in New Zealand and then the global financial crisis, I see no problems."

- © Fairfax NZ News