Adrian Orr appointed as RBNZ Governor

Following the announcement of Mr. Orr’s appointment as the next RBNZ governor, the incumbent governor Spencer said, “I’m delighted the Board has been able to secure a Governor with such a strong track record of delivery and public service.”

By Vince De Castro, Head of Marketing, Orbex

Adrian Orr, currently the Chief Executive Officer of New Zealand’s superannuation Fund, was unanimously elected as the RBNZ governor last weekend. The new governor is expected to take office from March 2018.

Previously, Mr. Orr served as the deputy governor and head of the financial stability from 2003 to 2007. The new RBNZ governor will be taking over from the acting governor, Grant Spencer. The appointment of Orr comes amid major changes at a political and governance level in the nation.

The newly elected Labor government laid out its plans to change the RBNZ’s mandate to also include employment targets beside inflation.

Following the announcement of Mr. Orr’s appointment as the next RBNZ governor, the incumbent governor Spencer said, “I’m delighted the Board has been able to secure a Governor with such a strong track record of delivery and public service.”

The market reaction to the appointment of the new governor was well received. This comes in part due to Orr’s past relationship with the central bank, something which his two predecessors did not have.

Most importantly, Mr. Orr is said to have a reputation for being a strong communicator with a firm understanding of the central bank’s monetary policies as well as past experience in financial regulation.

All of these factors are expected to herald a new era for the RBNZ which is currently undergoing major changes.

The challenges for Orr also come from the fact that the central bank will have to begin tweaking its language, as it will most likely undertake the dual mandate of employment and inflation. The timing of the dual mandate is expected to happen within a few months after Orr takes office as the RBNZ governor.

Most importantly, the new central bank governor will have a somewhat difficult task as the Labor party and its coalition members preferred to see more central bank market intervention in the currency markets. The preference for a weaker exchange rate for the New Zealand dollar was one of the poll promises made by the Labor party’s alliance member, NZ First.

The Kiwi is not a newcomer to central bank intervention, at least verbally anyway. Previous RBNZ governors have been vocal in jawboning the kiwi dollar at regular intervals whenever the exchange rate started to appreciate strongly.

NZ Economic Data – Quarterly GDP data in focus

On the economic front, the week ahead will see the release of the quarterly GDP reports from New Zealand. The report covers the third quarter ending in September 2017. According to the economists polled, New Zealand’s GDP growth rate is expected to rise at a slower pace in the third quarter.

Estimates show that third quarter GDP is forecast to rise 0.6% on the quarter, putting the year on year annual GDP growth slightly lower at 2.4%, compared to the 2.5% rate seen in the second quarter.

In the second quarter, the GDP growth rate rose by 0.8% on the quarter. This was higher than the previous quarter’s GDP which was revised higher to show a 0.6% increase. The acceleration in the GDP came amid a strong boost from the tourism sector.

Strong exports and domestic demand also underpinned the steady growth rate in the GDP. Expenditure was seen rising 1.1% while consumer spending also showed a steady pace of increase.

On a year on year basis, New Zealand registered a 2.5% annual GDP growth rate for the period ending in June 2017. This was the same pace of increase as the previous quarter. New Zealand’s GDP briefly surged to 3.5% in Q2 2016 before growth started to ease back a bit.

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