Months after various OIAs had been lodged on the question of Adrian Orr’s sudden departure on 5 March, we finally got a partial dump of documents this morning.

(Sufficiently mishandled that at 10:04 this morning they’d send an email to OIA requesters saying they’d email out the response at 10:45 and then have it on their public website at 11 (it being usual to give requesters at least some advance notice)). Then it seems they changed their minds because the emails didn’t come until after 11. And then it turned out – they emailed us again – that they’d sent only a near-final version of the Summary Statement they were releasing, not the final version that is on the website. There are material differences between the two – see below.)

I noted above that this was a partial release. Why do I say that? Because what is released today contains:

And those are just the omissions that I reckon were covered by my OIA on this matter (mine was only one of a number they claim to have responded to with their omnibus release this morning).

But, to the substance:

Strangely, and after months of speculation, these comments from my post the morning after the resignation ended up looking closer to accurate than I had recently supposed.

We have known for some time now that they had actually bid for a big increase in Funding Agreement resources over the levels allowed them by Grant Robertson just prior to the last election (and their statutory roles hadn’t changed since then), justifying this on the – simply extraordinary – grounds that it was in fact a modest cut relative to their own 2024/25 Budget; the one in which they had set out to spend far far in excess of the amount Robertson had allowed them for the last year of the previous Funding Agreement.

Both that 2024/25 Budget and the $1 billion funding agreement bid had been unanimously adopted by the Board last year (Orr himself was a board member). Details of all that are in this post.

Here is the text from the Summary Statement released (in error it appears) to OIA requesters this morning

For a start, this description seems odd. First, the Governor works for and to the Board not vice versa, so why the talk about Board members negotiating with Treasury “under the direction of the Governor”? But, second, all this paragraph talks about the Governor having a view as to what future budget resources were needed, but never mentions that the Bank’s bid had been adopted by the Board itself (the Funding Agreement is an agreement between the board – as the Bank’s governance body – and the Minister). Maybe Orr led the non-executives by the nose when the Funding Agreement bid was signed off last year, but in the end it wasn’t his call.

Then the Board seems to get blamed for bowing to reality. Too little has yet emerged of the Funding Agreement process documentation, but it seems likely that Treasury and the Minister had made pretty clear that a Funding Agreement that involved a large increase in funding relative to what Grant Robertson had approved just wasn’t going to be acceptable in these straitened fiscal times. It isn’t clear when the Minister or Treasury finally pushed back, but eventually they did, and the Board – recognising that ultimately choices about acceptable resources levels were for the Minister – had adjusted to that reality. Orr, by contrast, didn’t.

Here is the version of the Summary Statement that is now on the website (where there have been changes)

Note the attempt to shift the emphasis away from that meeting with the Minister of Finance on 24 February (the one that has already had quite a bit of coverage, with the Minister’s press secretary having to advise her to avoid answering a question about whether the Governor had ever shouted at the Minister).

Either way, what we are left with is a hotheaded Governor who finally came face to face with reality….and could not cope. And a Board which seems to have as worse-than-useless as had been widely supposed since most of them were appointed in 2022, but who – in the end – could actually face reality.

Look at those descriptions about “The matter was distressing for Mr Orr” (or “This caused distress to Mr Orr”). It is a bit like a bloodless description of a moody teenager having lashed out in the playground.

Fiscal restraint has, in fact, been the order of the day for (most) central government agencies since the change of government. Many chief executives probably had had grand visions for how much additional growth their agencies needed, and even perhaps a belief that in some sense the national interest demanded it. But almost all of them – perhaps MFAT aside, which wasn’t asked to – faced reality, and got on and implemented the budget cuts that were demanded of them. Not one seems to have thrown his or her toys out of the cot and stormed off with no notice. They acted like adults, people who’d developed the resilience we like to help shape in our children as they grow. But not Orr.

And that is why I don’t think it is at all correct to characterise his departure as just a dispute over budgets. Plenty of people have conflicting views on budgets, and it wasn’t as if – even when the final Funding Agreement decisions were made – the Bank was being asked to operate with very material cuts at all (a big-spending one at that). He just wasn’t going to get to grow his empire even bigger (you may recall from earlier posts that the Bank had grown staff numbers from about 600 on 30 June last year to about 660 on 30 January this year, and in the documents there is a note from Orr dated 5 Feb talking of having wanted to get up to 742 FTEs.)

It really looks to have been a toxic combination of headstrong volatile chief executive (who’d been lying to Parliament again just days prior to that critical meeting with the Minister), weak or non-existent accountability from his Board, and an utter lack of resilience or perspective which you’d only really expect to see from someone at the end of his tether. That is reinforced by that line in the final official version about how “the impasse risked damaging necessary working relationships”. Not among decent disciplined people – the Funding Agreement was a matter for the Board and the Minister (primarily the latter) and the Governor’s job as employee and chief executive was primarily to implement the agreement and manage within approved resources, and to do so in an effective not petulant way. After all, the reduced budget wouldn’t even come into effect until 1 July (so perhaps a resignation effective 30 June?)

Let’s grant (charitably) that Orr really really believed that the Bank’s statutory functions could only be performed with the $1 billion budget (and 40 or so senior managers). In those circumstances, perhaps the best thing to do was to move aside and let someone else take his place. But normal people – normal chief executives (see, eg the Vice-Chancellor of Auckland University today) – give notice, and work out that notice, enabling the governing body to do a thorough careful search for a permanent replacement. They don’t storm off with no notice, having engaged senior lawyers to negotiate an exit (presumably there were conventional resignation provisions in Orr’s contract already), offering no explanation whatever, despite holding one of the most powerful public sector positions in New Zealand.

If Orr emerges really badly from this Statement and document dump, he isn’t the only one.

Take the Board (Quigley and the other non-executives) for example.

It remains beyond belief how they (a) signed off on a budget last year so far in excess of the Robertson-approved levels, and b) how they ever imagined that it was appropriate to treat that unauthorised level as some new-normal base against which they could then offer up tiny cuts. Did any of them ever push back against management and insist that the Governor stress-test for them a range of alternative budget scenarios? (If so, there is no sign in the published minutes).

And where was the Board in controlling the process at the end? Why did they let the Governor simply leave office the day of the announcement, rather than insisting on him working out notice? Why did they grant him (presumably paid) “special leave” for the period 5 March to 31 March (rather than, say, making him take annual leave if his resignation was going to be legally effective until 31 March). And why did they allow such a pig’s breakfast of a communications debacle to (a) occur, and b) persist for months?

To be sure, both the Board and the Minister were put in a difficult position by the Governor’s petulant walk-off. They hadn’t, as at 5 March, finalised the Funding Agreement (indeed, the Minister’s later releases on that subject suggest some continuing back and forth over the coming weeks), so they probably couldn’t release the whole picture.

But as it was they actively misled both their own staff and the wider public.

On staff, this is from a set of internal Q&As given to managers the day after Orr’s resignation to use with staff.

When in fact, on their telling now, it was all about looming significant budget cuts (relative to the Bank’s own budget, if not relative to the previous Funding Agreement) the Board had, perhaps reluctantly, accepted and the Governor has refused to (and petulantly stormed off).

As for the wider public, Neil Quigley – the Board chair, with an unfortunate reputation now for not being straight on RB things, but somehow succeeding to keep getting reappointed – held a short press conference late on the afternoon of the resignation.

In it, he told us that he (he avoiding answering for the Board) had still had confidence in Orr? How is that possible when your chief executive stormed out the door apparently because he couldn’t live with not getting a further inflated Funding Agreement and reckoned he couldn’t work effectively with the Board and/or Minister?

Then he was asked whether Funding Agreement issues played a part. Accordingly to the transcript I was kindly sent his response was

“we are working through some views about the funding of the bank, the board is in the process of finalizing its submission to the Minister about our next funding agreement. So that conversation about funding has involved the normal challenge that you would expect, and has been constructive. So the board is managing that process”

Which is just utterly at odds with what we have learned today.

(The very next question Quigley was asked was what about the big conference the next day, and the thought that the resignation might overshadow it. He responded “with the decision that Adrian had made, he decided actually that it was better not to be in front of the conference, having made that decision himself”. Which is weird – if not overly important – as in today’s document dump there is an email from Orr, at lunchtime on 5 March, less than an hour before the resignation went out, talking about how he’d be proudly opening the conference the following day, “there to discuss today’s news”….)

The press conference went on

Q: Reserve Bank governors don’t just up and resign? What has been the precipitating factor to what you call this personal decision

A: I think you have to remember that the job of the Reserve Bank Governor is one where you face unrelenting critique of your actions. You know, no matter what you do, there are near alternatives that other people say that they would have taken. And so there is a time when you think having achieved what you wanted to achieve, that’s enough.

And I guess that isn’t inconsistent with an emotional end-of-his-tether story, but….it is rather at odds with today’s revelation that the Board had accepted budgetary reality and the Governor had simply refused to.

And finally

Q, Had the government, had the government communicated to you or Adrian any issues that triggered him coming to you in the last few days?

A. No, there’s no, been no direct communication officially from the government on anything that I could think of in that.

Except that that is just evidently not true, given a) the meeting with MoF on 24 February and b) the now official statement that by the Board meeting of the 27th it was clear that the Board and Minister were willing to agree a number the Governor could not accept. The initiative for cuts was not, it is pretty clear, coming from the Board but the government.

We were actively misled (some would use stronger words). If you weren’t willing to give honest answers, why would a decent person hold a press conference at all? No one compelled him to.

And, a final question for the Board, why did not insist that straight answers be given weeks ago? If it was difficult to do so on 5 March, there can have been no possible excuse once the Funding Agreement itself had been agreed between the Board and Minister (published 16 April, almost two months ago now). The public was owed straight answers as soon as reasonably practicable (which also happens to be the OIA legal standard). The Board, and/or the acting/temporary Governor, seems to have been unbothered. But accountability is about things that are awkward or uncomfortable for you, not just the things you want the public to know.

Incidentally, the Minister of Finance also seem to have abetted keeping the public in the dark (if, perhaps, less directly responsible than the Board). This came out in an earlier Herald OIA, reported here

She must have been advised – assuming what the Bank today told us is true – that actually funding agreement issues were at the heart of the departure.

To wrap up, neither Orr nor the Board emerge with much credit from this affair – Orr none at all, having led the drive to the bloat and loss of focus, failed to read the (fiscal times), and then with so little self-discipline and without the sort of maturity one should be able to take for granted in someone holding high office as Governor, and the Board only a modicum for having very belatedly bowed to reality and accepted that the funding agreements weren’t going to go on rising forever.

Orr has gone, and you might think (hope) that after such an astonishing display he would struggle ever again to get a top-tier job.

But the Board – hardly changed at all over the last year – remains, and in particular Neil Quigley continues (reappointed by this government) as chair for another year. In that role, he drives the selection process for a nominee for the new Governor. This is the person with a track record of actively misleading the public on RB matters even before this last blow-up (remember his assertions, contradicted by both documents and his colleagues, that experts had not been blackballed from the first MPC), but who, more importantly, was responsible for driving the reappointment of a Governor so out of control and personally undisciplined that he couldn’t live with some budgetary restraint (recall that the final level MoF imposed represents pretty minor savings relative to Robertson’s last approved levels) and couldn’t even manage a disciplined and tidy no-drama exit. To add to which, Quigley was Board chair when that egregious 24/25 Bank budget was set. Every day he remains in office diminishes our central bank, and it is astonishing that the Minister of Finance has done nothing to force the issue, to make clear that the government no longer has confidence in Quigley to chair the Board, particularly given the vital role the Board has in the selection. We simply cannot afford another appointee – from Quigley and his board – even half as bad as Orr.

(There is more material in the documents released – including a 14 Feb email from Quigley to Orr suggesting that a deal was likely to be done with Treasury in the following few days – but that is enough for now.)

UPDATE: A response to this OIA should also be due shortly