New RBNZ governor 'notable' appointment
VERNON SMALL AND ROELAND VAN DEN BERGH
A change of guard at the Reserve Bank should not lead to an immediate change in monetary policy, an economist says.
Former World Bank managing director Graeme Wheeler is to be the new Reserve Bank Governor, taking over after Alan Bollard's second five-year term expires on September 25, Finance Minister Bill English said today.
"We expect the first official cash rate hike in March 2013, once the new governor has settled in," Westpac chief economist Dominick Stephens said.
Wheeler's selection as an outsider was a "notable move" and could point to an agenda for more substantive changes at the Reserve Bank.
"Both the previous governors, Don Brash and Alan Bollard, were surprise choices, and both were brought in with a mandate for changes in how the Reserve Bank operates."
Such changes could include moving monetary policy decisions from solely the governor to a committee.
"Like Dr Bollard, Mr Wheeler does not have central banking experience, so it would appear that leadership qualities were a key consideration," Stephens said.
"It is possible that Mr Wheeler was chosen as someone who could shepherd through any such changes over the next few years," he said.
Wheeler's appointment was an opportunity for the Government to broaden the number of tools the Reserve Bank could use to manage monetary policy rather than relying only on official cash rate changes, Green Party co-leader Russel Norman said.
"The Reserve Bank's one-tool toolkit is plainly inadequate for the economic reality we live in," Norman said.
"Currently, the Reserve Bank faces a dilemma. If it cuts interest rates, it risks another housing bubble. Instead, it has done nothing, which causes a high exchange rate, hurting exporters and domestic producers."
One option could be to allow the Reserve Bank to consider the amount banks could lend against the value of a house, Norman said.
English said he did not envisage any major changes to the policy targets agreement (PTA), but left the door open to tweaking it.
"I consider that the current PTA has served New Zealand well and there are benefits in maintaining consistency in the PTA," English said.
"However, the global financial crisis has focused some attention on monetary policy frameworks, and I want to ensure that the PTA continues to reflect best international practice."
Wheeler will be governor-designate until a new policy targets agreement is finalised in the next few months. This is required before a new governor is appointed.
"Mr Wheeler's extensive experience makes him a highly respected figure in world financial markets and within New Zealand," English said. "We were fortunate to have someone of his calibre available for this important role."
From 1997 to 2010, Wheeler was employed by the World Bank. His most recent roles there included managing director operations (2006-2010), and vice-president and treasurer (2001-2006). Previously, he was at the New Zealand Treasury as deputy secretary and treasurer of the Debt Management Office.
Wheeler, a New Zealander, currently lives in the United States and runs his own advisory business.
As required under the Reserve Bank Act 1989, the Reserve Bank board of directors recommended Wheeler's appointment to English, after a recruitment process domestically and internationally.
"Given his experience and standing, combined with his technical and leadership qualities, the board considered that he has all the qualities required to become governor and chief executive of the Reserve Bank," English said.
He also paid tribute to Bollard for his leadership at the Reserve Bank over the past 10 years.