2023 Annual Review hearing
Watch the Finance and Expenditure Committee (FEC) hearing for the 2023 Annual Review at 2:15pm with Reserve Bank of New Zealand Board Chair, Neil Quigley and Governor, Adrian Orr with support from other senior leaders.
How to watch the livestream
Watch the livestream on the NZ Parliament website
Read the opening statements
It is my privilege to be here with you today representing the Reserve Bank of New Zealand’s Board. I’m pleased to be joined by Governor Adrian Orr, Assistant Governor for People and Culture Juliet Tainui-Hernandez, and Assistant Governor for Finance and Commercial Operations Greg Smith as well as other members of the Executive Leadership Team.
The past year represented a significant turning point in our history with the new Reserve Bank Act 2021 coming into force and the establishment of a governance board with significant decision-making responsibility.
A great deal of work has gone into bringing our new governance frameworks into action. This includes the creation of a comprehension delegations framework, and setting up a number of standing Committees of the Board to allow detailed engagement with key areas of the Bank’s operations.
The Board has overseen the development of our Statement of Intent (2022-2026) and agreed to a new Foreign Reserves Management and Coordination Framework. This ensures that the Reserve Bank is well prepared for the extreme circumstances that may justify foreign exchange interventions to support our policy objectives.
The Board reviews the performance of the MPC and its members. This review includes the quarterly Monetary Policy Statements and summary records of the MPC for each OCR decision. The Board’s review concluded that the MPC and its members have adequately discharged their responsibilities in circumstances that have been challenging for setting monetary policy.
A great deal has been achieved over the past year, but much remains to be done as we continue our programme of transformation and modernisation. Key focus areas include implementation of the Deposit Takers Act, establishing a Depositor Compensation Scheme, and setting robust new prudential standards for deposit taking institutions. The new Deposit Takers Act, will transform our approach to the regulation of banks and other deposit takers, and introduce the Depositor Compensation Scheme. There are many years of work ahead to bring this legislation into full force. The Variation to our Five-Year Funding Agreement will facilitate this work and provided much needed investment in the RBNZ’s critical infrastructure and capacity to implement the legislation.
We are still in a period of deliberate investment in our people and systems as we build the capacity needed to support priorities such as the intensification of supervision as well as expanded requirements under the RBNZ Act 2021. Our goal is to be the most cost-effective, fit for purpose, central bank for New Zealand.
I would like to take this opportunity to thank RBNZ staff, and all my Board colleagues for their advice, support and contributions throughout the year. The considerable achievements we have made in the past year could not have happened without their professionalism and dedication. I will now pass over to Governor Adrian Orr.
When I spoke to this Committee following the release of our November Monetary Policy Statement, I explained why the Monetary Policy Committee had agreed to maintain the Official Cash Rate (OCR) at 5.50%. In short, consumer price inflation at 4.7% remains too high, and we remain wary of ongoing domestic inflation pressures. The OCR remains at a restrictive level to slow spending growth in the economy and reduce inflation pressures.
The Monetary Policy Committee will be giving its full assessment of the latest economic data at our February Monetary Policy Statement, due out at the end of this month. It is worth noting that this will be the first reflecting our new remit.
You’ve just heard from the Bank regarding our November Financial Stability Report. I won’t repeat what has already been covered, but I would like to note some other financial stability highlights from the past year.
In December we completed our Outsourcing Policy. This ensures major New Zealand banks can continue to operate if their parent bank fails. Our review of our insurance legislation continues, and we have published a new interim solvency standard. The new Deposit Takers Act, as mentioned by our Chair, will strengthen and simplify our approach to the regulation of banks and other deposit takers, and introduce the Depositor Compensation Scheme. We are well advanced in building the capacity, capability, and resilience needed to support the new legislative expectations.
The recent variation to our Five-Year Funding Agreement was triggered primarily by the Deposit Takers Bill becoming legislation, as well as progress in some multi-year investment programmes. The likelihood of the variation was signalled at the outset of our current Funding Agreement.
We are progressing investment in the Bank’s critical infrastructure, including cyber and physical resilience, cash management, investigating a Central Bank Digital Currency, enhanced data collection, and more intensive regulatory supervision given our expanded mandate.
As a full-service Central Bank, we work continuously on being cost-effective and fit for purpose. Our international comparators highlight we are on course.
We work closely with our Council of Financial Regulators partners. We have achieved significant progress on the regime for financial market infrastructures, cyber resilience, and a range of shared issues including financial inclusion, technology, and climate change.
We retain strong relationships internationally, including with other central banks and regulators, and through relevant international institutions such as the Trans-Tasman Banking Council, the South Pacific Central Bank Governors, the International Monetary Fund, the Bank for International Settlements, and the Executives’ Meeting of East Asia Pacific Central Banks. These relationships enable us to support initiatives and meet international standards and best practice.
I would like to thank the Board, the Monetary Policy Committee, and our Leadership team for their support. I am tremendously proud of the people at Te Pūtea Matua and all they have achieved. I now welcome your questions.
Tēnā koutou, tēnā koutou, tēnā koutou katoa