Who is the new Reserve Bank boss?

JAMES WEIR
Last updated 05:00 27/06/2012

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Reserve Bank Governor-in-waiting Graeme Wheeler was once touted as a potential World Bank president and gained fame for telling his boss, Paul Wolfowitz, to resign during what was seen as a civil war at the World Bank.

Wheeler's appointment to take over at the central bank when Alan Bollard steps down on September 25 was welcomed yesterday, even though many had expected deputy governor Grant Spencer to win the top post.

Spencer may be disappointed and it is not clear if he will stay at the central bank, given Wheeler may serve at least one, possibly two, five-year terms. Wheeler has a strong international reputation, especially in world financial markets.

He takes over what is arguably one of the most important roles in the economy as the sole final decisionmaker on monetary policy: what to do with official interest rates and when.

Wheeler resigned as managing director of the World Bank in 2010, after 12 years at what is effectively the world's most important aid agency.

The World Bank borrows from institutions on international markets, including New Zealand, and lends to developing countries, especially for big projects.

Wheeler's former boss at the bank, Wolfowitz, was appointed by then-US president George Bush, but stepped down in 2007 after accusations of impropriety regarding his involvement in a high-salary promotion for his Libyan girlfriend, Shaha Ali Riza, within the US State Department.

Former Reserve Bank governor Don Brash said he met Wheeler when Wheeler was at Treasury's debt management office.

"I have a high regard for him, though I don't know him as well as I know Grant [Spencer]," he said.

Wheeler's senior executive role at the World Bank would give him a good standing in his role as chief executive of the Reserve Bank here.

"I would think he'd be an excellent governor, though as far as I know he has not had a lot of experience in monetary policy, but a lot of experience in economics," Brash said.

Alan Bollard was also a novice when he moved into the central bank from top posts at Treasury and the Commerce Commission.

Wheeler's international financial connections are seen as a positive for when New Zealand goes out to borrow money for the government.

Former treasurer of the NZ Debt Management Office Phil Combes, who now leads the Local Government Funding Agency, said he was very pleased to hear of Wheeler's appointment and expected him to be very good.

"It is good for New Zealand capital markets and that's going to make my life a bit easier," he said.

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"He [Wheeler] worked himself up to one of the two second-in-charge positions at the World Bank and therefore has done extremely well. He was very well regarded at the World Bank and had a reputation as a good people manager and an ideas guy.

"He made a great contribution there and had done an excellent job as head of the DMO [in New Zealand]."

Infometrics managing director Gareth Kiernan said he had expected Grant Spencer to get the top post, and he may have been a bit more "heavy-handed" in his regulatory approach, as the head of financial stability at the central bank.

Wheeler probably had more experience in monetary policy issues than Bollard had when he was appointed 10 years ago, Kiernan said.

"He may potentially hit the ground running and be more up with the play," Kiernan said. "He may have more of a natural feel for how the framework works."

AN IDEAS GUY

Educated: University of Auckland; lives in Washington, DC.

2010-present: Non-executive director, Thyssen-Bornemisza Group. Co-founded a European-based company providing advice on Russian privatisation to investors and Russian policy makers.

2006-2010: Managing director of operations at the World Bank, Washington. Joint oversight of 12,000 staff with administrative budget of US$1.7 billion (NZ$2.1b) and a portfolio of 1600 projects.

2001-2006: Vice-president and treasurer of the World Bank. Managed asset and liability portfolios totalling US$250b, and an annual borrowing programme of US$10-20 billion.

1997-2001: Director of the Financial Products and Services Department at the World Bank. Led team to modernise the World Bank's lending products. 1993-1997: Treasurer at the New Zealand Debt Management Office and deputy secretary to the New Zealand Treasury.

1990-1993: Director of Macroeconomic Policy at the New Zealand Treasury.

1984-90: Economic and financial counsellor to the New Zealand delegation to the Organisation for Economic Co-operation and Development, Paris.

1973-1984: Adviser and senior adviser at the New Zealand Treasury.

ENGLISH SEEKS STABILITY

Finance Minister Bill English says the Government has accepted the Reserve Bank board's recommendation for Graeme Wheeler's appointment to lead the central bank.

Though the Government would have the opportunity to renegotiate the policy targets agreement with Wheeler in the next few months, English indicated there was unlikely to be a change to the inflation-based target.

The Government was "looking for continuity" for the Reserve Bank to maintain its target range for inflation of between 1 per cent and 3 per cent.

"There is so much uncertainty around these days that we want to maintain as much stability as possible. So we are not looking at major changes to the policy targets agreement."

Business New Zealand chief executive Phil O'Reilly said retiring governor Alan Bollard brought a "deep insight into the economy from the real world perspective" as a previous head of the NZIER and the Commerce Commission.

- BusinessDay.co.nz

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