WELLINGTON (Reuters) – New Zealand’s appointment of national pension fund chief Adrian Orr as the next central bank governor was welcomed by investors who had feared that a dual mandate under the new Labour-led government could have led to more unorthodox monetary policy.
The new coalition government campaigned on a bid to make the economy work for its people, putting housing and employment at the heart of its political agenda.
As part of that, the government launched a review of the Reserve Bank Act to add maximizing employment as a monetary policy goal alongside inflation – in a historic move for the first central bank ever to adopt an official inflation target.
Those plans, along with the finance minister’s comments that he wanted a governor that would adhere to the dual mandate, had sparked some worries that the central bank could lose its focus on inflation, analysts said.
The appointment of Orr, a former deputy governor who also worked as chief economist for the bank, appeased some of those concerns, pushing the New Zealand dollar to a two-week high.
“Adrian is pretty well known in markets,” said Michael Reddell, a former RBNZ official who served with Orr on its monetary policy committee in the 1990s.
“It’s not someone who’s totally flaky leftwing, because no one’s had a clear sense of who was in the running and it could have been someone out of left field who is more strongly perceived as highly dovish.”
The New Zealand dollar NZD=D4 hit $0.6930 late on Monday against the U.S. dollar, and remained close to those levels at around $0.6929 on Tuesday.
The currency, the world’s 11th most-traded, has fallen nearly 6 percent since the September election brought in a more protectionist Labour-led coalition in the first change of government for a decade.