Finance Minister Steven Joyce appoints Grant Spencer as Acting Governor for the six months immediately after the election

By David Hargreaves

Finance Minister Steven Joyce has tackled a tricky problem by appointing Grant Spencer as Acting Governor of the Reserve Bank for the six months immediately following the election.

Spencer, who has indicated he won’t seek the job fulltime, will retire after the six months. He will replace in an interim role the current Governor Graeme Wheeler, who as expected, has said he’s not seeking another term.

One person seen as a likely candidate for the Governor’s job – if available – is the chief executive of the NZ Super Fund Adrian Orr. He was Deputy Governor of the RBNZ till joining the NZ Super Fund in February 2007. Another former RBNZ Deputy Governor and indeed Acting Governor, Rod Carr, who was chairman of the RBNZ board till last year, is seen as another possibility. Carr is vice-chancellor at the University of Canterbury.

The tricky thing for the Government is that Wheeler’s five-year term expires on September 26, just three days after the election.

If the Government had appointed a new Governor before the election this would have meant that this new Governor might not meet the approval of a new Government – in the event of National losing the election. Secondly it’s possible the Policy Targets Agreement (PTA) signed between the Governor and the Finance Minister would have to be renegotiated twice in a short space of time before the election.

The appointment of Spencer, the current Deputy Governor and Head of Financial Stability gets around this and is likely to be viewed favourably as a compromise situation.

Joyce said that Wheeler had led the bank in a very calm and expert manner and done a good job.

The Reserve Bank has been seeking to get debt-to-income ratios incorporated into its ‘macro-prudential toolkit’ although it has promised it wouldn’t use them at the moment. Wheeler and previous Finance Minister Bill English had discussed these toward the end of last year, but the Government has appeared resistant.

Joyce said he would have “more to say on that in the next little while”. They were “still live”. Joyce stressed that there would be continuity, and this included with the PTA which would be rolled over as is straight after the election for the six months Spencer is Acting Governor.

Joyce indicated that in the event National is re-elected, he didn’t see the need for any significant changes to the PTA, which he believed had served NZ well as it stands. It targets inflation between 1% to 3% with a focus on achieving the 2% midpoint of that range.

This is the announcement from Joyce:

Finance Minister Steven Joyce will appoint current Deputy Reserve Bank Governor Grant Spencer as the Acting Governor of the Bank for six months, following the expiry of current Governor Graeme Wheeler’s term on September 26 this year.

“Mr Wheeler’s term as Governor expires on September 26, three days after the general election, and he has decided not to seek reappointment,” Mr Joyce says. “Following advice from the Cabinet Office and consultation with Cabinet, I have decided that the most appropriate course of action would be to appoint an acting Governor for a six month period to cover the post-election caretaker period. This will give the next Government time to make a decision on the appointment of a permanent Governor for the next five year term.

“I have decided to appoint Mr Spencer as acting Governor from 27 September 2017 to 26 March 2018, on the advice of the Reserve Bank Board of Directors. The Government is pleased to have someone of his calibre to move into the role. He is a highly experienced member of the Bank’s Leadership team who will provide stability and continuity through this caretaker period prior to the appointment of the new Governor.”

Mr Joyce and Mr Spencer have agreed that there will be no change to the Policy Targets Agreement for the period Mr Spencer will be acting Governor.

Mr Spencer has advised the Government that he won’t be applying for the permanent role, and intends to retire following his period as acting Governor.

The Bank has had one previous acting Governor. Former Deputy Governor Rod Carr was appointed in an acting capacity for the pre-election and caretaker period around the 2002 General election, following the resignation of Governor Brash.

Mr Joyce thanked Governor Wheeler for his service to the Bank.

“The Governor has performed his role calmly and expertly during a highly unusual period for the world economy. I thank him for his service up until now and for the remainder of his term as Governor,” Mr Joyce says.

And this is the announcement from Wheeler:

Reserve Bank Governor Graeme Wheeler today announced that he will not be seeking a second term as Governor when his current term ends on 26 September this year.

Mr Wheeler said: “It has been a great privilege to serve in this role, and in the remaining eight months I will remain fully focused on the economic challenges and opportunities facing the New Zealand economy. It was my intention, when I was appointed, to serve one term, and then to take on governance roles.”

Mr Wheeler was previously employed at the World Bank from 1997 until 2010, where he was Managing Director Operations (2006-2010), and Vice-President and Treasurer (2001-2006). From 2010 to 2012, he ran his own advisory business in the United States.

Under section 40 of the Reserve Bank of New Zealand Act, the Governor is appointed for a five-year term by the Minister of Finance, on the recommendation of the Reserve Bank Board.

The Chair of the Reserve Bank Board, Professor Neil Quigley, said the Government has advised the Board that, because of the proximity of the General Election this year, the Board’s recruitment process to identify a successor to Mr Wheeler needs to commence later in the year, and an acting Governor would be appointed to cover the post-election caretaker period.

The Minister of Finance, Steven Joyce, has, on the Board’s recommendation, announced the appointment of Grant Spencer under section 48 of the Reserve Bank Act to act as Governor for a period of six months on the conclusion of Mr Wheeler’s term. Mr Spencer had indicated his intention to retire this year but has agreed to defer in order to fill the acting role.

Mr Spencer is Deputy Governor and Head of Financial Stability, a position he has held since 2007. He serves as chair of the OECD’s Committee on Financial Markets, and has held senior management positions at the Bank in economics and financial markets.

In 1995-2004, Mr Spencer was with the Australia and New Zealand Banking Group, holding senior management roles in treasury and strategy in New Zealand and Australia. He has also served terms with the International Monetary Fund as a Special Advisor, European Department, and as New Zealand’s Alternate Executive Director.