A Spinoff attempt to parse the saga, drawing on official information releases, reporting by a range of media and conversations with those involved, has identified a number of previously undisclosed events, including a pivotal extraordinary board meeting on February 14 \u2013 less than three weeks before the announcement of Orr\u2019s resignation. The Valentine\u2019s Day meeting had been called to discuss a paper prepared by the governor and staff that explored a \u201cminimum viable product\u201d funding proposal.\u00a0<\/p>\n
On February 13, the day before, the Treasury provided advice to the minister of finance on the existing five-year funding bid from the governor. In a memo released yesterday, the Treasury tells Nicola Willis it \u201cdoes not support the proposal due to significant value for money concerns and the proposal not aligning to your expectations in the March 2024 letter to focus the baseline review on low value spending and non-essential back-office functions\u201d. It suggests that instead of the sought $981 million, five-year funding of $692 million would be more appropriate.<\/p>\n
None of the above had been included in the timeline released by the Reserve Bank last week. That timeline, issued at the demand of the chief ombudsman after complaints about the bank\u2019s response to official information requests, begins with an entry on February 20. Numerous documents that have been sought by a range of parties continue to be withheld by the Reserve Bank, which cites grounds of privacy and obligations of confidence.<\/p>\n
Willis told the Spinoff yesterday via a spokesperson that she had not been made aware of the February 14 special board meeting. Of the minutes, she added: \u201cMy office has asked the Reserve Bank why they were not provided in response to previous Official Information Act requests. The bank has advised that the minutes of five board meetings were overlooked when responding to OIA requests. Obviously, that is completely unacceptable and underscores the importance of the Bank urgently reviewing the way it responds to public information requests.\u201d<\/p>\n
\u2018Obviously, that is completely unacceptable\u2019: Nicola Willis<\/p>\n
Deficiencies in responses to OIA requests were instrumental in the exit of the board chair. Quigley, who is also the vice-chancellor at University of Waikato, departed with immediate effect after 15 years on the board, including nine as chair, last Friday afternoon. Nicola Willis told Newstalk ZB<\/a>: \u201cIf Mr Quigley had not offered his resignation, I would have asked him for it.\u201d<\/p>\n The Reserve Bank has now provided the Spinoff with a copy of the minutes to the special meeting on February 14. They confirm that the chair said the paper prepared by Reserve Bank staff for discussion, centring on an adjusted $900m funding application, had been superseded by \u201cstrong signals from the minister and Treasury\u201d he had received, \u201cthat a FYFA at $900m will not be accepted, that Treasury advice and the minister\u2019s initial starting position are substantially lower, and that the Bank will need to show willingness to work with a much lower FYFA funding limit if it is to have influence on the minister\u2019s final determination.\u201d<\/p>\n Speaking to RNZ <\/a>on Wednesday morning, Willis rejected suggestions she had not been sufficiently candid in previous accounts of the circumstances surrounding Orr\u2019s exit, saying she had been \u201cas upfront and transparent on this as you could be\u201d. \u201cIt\u2019s not helpful for the minister who doesn\u2019t know the ins and outs of what they\u2019re talking about to wade in with reckons,\u201d Willis said. \u201cI\u2019ve left it to the Reserve Bank to communicate about this at all times \u2026 Ultimately, I haven\u2019t been happy that they\u2019ve done a good enough job of that.\u201d<\/p>\n Willis told Newstalk ZB she had not read the contents of a \u201cstatement of concerns\u201d issued to Orr, which has since been withdrawn by the board. She said: \u201cI do not also know what response Adrian Orr, either personally or via his lawyers, gave to it. And I\u2019m very conscious not to defame anyone and to be careful about how I characterise that letter when I have not seen it.\u201d<\/p>\n Orr has not made any comment since his resignation in March. Appointed to lead the central bank by Grant Robertson when Labour came to power in 2017, he faced sharp criticism from the National opposition, most volubly over the response to the Covid crisis. As opposition finance spokesperson Willis said she was \u201cappalled\u201d by Robertson\u2019s decision to reappoint Orr for five years in 2022 absent an independent review of the bank\u2019s performance.<\/p>\n Willis has stressed that she has remained \u201cvery conscious\u201d of respecting Reserve Bank independence throughout the recent saga.\u00a0<\/p>\n Concerns about potential corrosion <\/a>of the Reserve Bank\u2019s pioneering independence on monetary policy settings have also been raised in relation to comments made by the prime minister. In an August 25 interview with Mike Hosking on Newstalk ZB, the prime minister said <\/a>it was his practice to meet the governor ahead of official cash rate announcements and \u201ccan often give my views\u201d, his \u201creckons and perspective\u201d on interest rates.\u00a0<\/p>\n In the most recent example he agreed with Hosking that the cut should have been twice the 25 points that materialised, and had \u201cpretty much\u201d shared that view with Christian Hawkesby, the acting governor, on behalf of the Monetary Policy Committee. Luxon later told reporters<\/a>: \u201cI want to be under no illusions. I do not direct the Reserve Bank. Its independence is sacrosanct.\u201d<\/p>\n Orr declined a request for comment. Quigley directed inquiries to the Reserve Bank.<\/p>\n A timeline, wrapped around a timeline<\/p>\n What follows is a more comprehensive timeline than that issued by the Reserve Bank \u2013 theirs, however, is included in full and verbatim (italicised for clarity).\u00a0<\/p>\n September 2024<\/p>\n The Reserve Bank board chair, Neil Quigley, and governor, Adrian Orr, present a proposal to Treasury, in its role as adviser to the minister, seeking funding of $981 million in operating expenditure over five years. The board is \u201cactively involved in the preparation of this proposal through multiple reviews and updates as well as a focused workshop\u201d.\u00a0<\/p>\n (In April of 2024, the minister of finance had written in a letter of expectation <\/a>to Quigley that she expected the Bank funding proposal to \u201calign with the Crown\u2019s fiscal sustainability programme\u201d, which had sought 6.5% cuts across the public sector.)<\/p>\n February 13, 2025<\/p>\n The Treasury sends advice <\/a>to the minister of finance on the existing five-year funding bid from the governor. Its \u201cpreliminary assessment of the Reserve Bank of New Zealand\u2019s funding proposal\u201d is offered \u201cto support your discussion on 24 February 2025 with the RBNZ\u2019s chair and governor on the 2025-30 FYFA [five-year funding agreement] and any earlier engagement with them.\u201d\u00a0<\/p>\n The top line: \u201cThe Treasury does not support the proposal due to significant value for money concerns and the proposal not aligning to your expectations in the March 2024 letter to focus the baseline review on low value spending and non-essential back-office functions.\u201d<\/p>\n Treasury notes that $981 million would represent a significant increase from the previous five-year allocation of $655 million. Its counter-suggestion \u2013 based on what it calls \u201ca bottom-up analysis\u201d \u2013 is that \u201can adequate 2025-30 FYFA funding envelope would be around $692 million in opex [operating expenditure].\u201d<\/p>\n February 14<\/p>\n At 7.39am, ahead of a special meeting of the Reserve Bank board, the governor emails a \u201ccontext note\u201d to the board. Having not been made aware of Treasury advice to the minister, he writes: \u201cWe have not heard from Treasury as to a preferred number \u2013 but we have responded significantly and continuously to their \u2013 and the Board\u2019s \u2013 signalling regarding cost-effectiveness.\u201d Orr has tabled for board discussion a \u201cminimum viable product\u201d proposal for five-year funding, revised to $900 million.\u00a0<\/p>\n He adds: \u201cThe reduction in proposed expenditure alters the total and balance of risk the Board must traverse in the years to come \u2013 absent any unanticipated shocks. \u2026 The FYFA [five-year funding agreement] construct is deliberately five years to attempt to maintain appropriate operational independence for the central bank \u2013 for monetary policy and prudential settings, amongst other CB tasks as designated \u2026 The importance and clarity of operational independence for central banks is judged by global financial markets now and in the future. Not by any current government.\u201d<\/p>\n At 10.15am, the special meeting of the Reserve Bank board opens. The chair asks at the outset that Reserve Bank management do not attend. The Spinoff understands that staff remain standing outside the meeting room for more than an hour. (\u201cClosed door, board-only time is routine at Reserve Bank meetings,\u201d said a Bank spokesperson.)<\/p>\n The chair asks that the $900 million proposal be put aside and notes he has \u201creceived strong signals from the minister and Treasury that a FYFA at $900m will not be accepted, that Treasury advice and the minister\u2019s initial starting position are substantially lower, and that the Bank will need to show willingness to work with a much lower FYFA funding limit if it is to have influence on the minister\u2019s final determination\u201d.<\/p>\n The minutes record that the board then discuss \u201cthe need to have sufficient funding to deliver on RBNZ\u2019s core mandate, and to support the statutory independence of the bank\u201d and \u201cthe importance of the Board now being more directly involved in the FYFA process, including discussions with Treasury and the minister\u201d. The chair asks the governor to prepare a new board paper \u201cbuilt around a funding envelope of $750m\u201d, according to the minutes. \u201cThe paper should clearly explain the risks of funding at this level, and of funding at any lower level.\u201d Finally: \u201cIt was agreed that the chair and the governor would meet with\u00a0 Treasury officials to advance the discussion and seek a basis for joint advice to the minister on the FYFA including any exclusions from it.\u201d<\/p>\n February 18<\/p>\n A memo is sent to the board and Reserve Bank executive staff formally requiring that a document be provided to the board exploring a $750 million funding agreement.<\/p>\n An impact analysis prepared by staff and provided to the Spinoff estimates that a $750 million funding level would likely require \u201can indicative headcount reduction of between 182 and 265 based on a weighted average cost per headcount.\u201d At that point the workforce numbered around 660. (In August, the Reserve Bank said <\/a>it was looking to cut 142 roles.)<\/p>\n February 20\u00a0<\/p>\n Meeting between Professor Quigley, Mr Orr and Treasury officials regarding the five-year funding agreement for the RBNZ. There was disagreement between Mr Orr and Treasury officials about the appropriate level of funding for the RBNZ.\u00a0<\/p>\n The Reserve Bank chair writes to <\/a>a Treasury official after a meeting which included discussion of the funding agreement: \u201cI am sorry Adrian lost his cool with you this afternoon.\u201d\u00a0<\/p>\n February 24<\/p>\n Meeting between Professor Quigley, Mr Orr, the minister of finance and Treasury officials relating to:<\/p>\n Capital requirements for banks<\/p>\n The five-year funding agreement for RBNZ\u00a0<\/p>\n Mr Orr emailed the RBNZ Board to relay his view of the discussions at the meeting with the minister of finance and to express his concerns about what level of funding was needed for RBNZ. Mr Orr stated that he considered that he was unable to perform his duties given the uncertainty over funding and described what he perceived as a lack of trust between the parties.\u00a0<\/p>\n The lack of trust appears to stem largely from the process that led to the February 14 meeting and an absence of examination of the implications of a cut in funding on the Bank\u2019s work. Concerns around proposed loosening to bank capitalisation requirements appear also to have played a part.<\/p>\n Orr recuses himself from further discussions on the funding agreement and leaves the meeting.<\/p>\n Minutes from the meeting note that Orr \u201cmade it clear\u201d he disagreed with the Treasury over the funding necessary for the bank to meet its requirements and \u201cexpressed his frustration regarding the relationship between the RBNZ and the Treasury\u201d, according to the Herald<\/a>.<\/p>\n February 26<\/p>\n Mr Orr emailed the RBNZ board ahead of a meeting with the board, stating that the governor and the board are at an impasse due to the disagreements over funding and that it was for the board to take the next step.\u00a0<\/p>\n Ahead of a planned board strategy day in Auckland, the governor had sought an expression of support to lead negotiations over the funding agreement. This was not provided. (A Reserve Bank spokesperson declined to comment on this, saying: \u201cIt is in the interest of the effective conduct of public affairs for the governor and the RBNZ Board to be able to engage in free and frank dialogue about disagreements to do with the governance of RBNZ. This is particularly the case where tensions arise. If this information were released, this could limit this type of communication in the future.\u201d)<\/p>\n Mr Orr met with the RBNZ board. Following this meeting Professor Quigley emailed Mr Orr advising that the board intended to write to him with its concerns.<\/p>\n February 27<\/p>\n Mr Orr advised the board chair that he will remain out of the office until resolution of the matter and that Christian Hawkesby would be acting governor. This was agreed to by the board.<\/p>\n Professor Quigley, on behalf of the non-executive members of the board, writes to Mr Orr to set out various concerns relating to:\u00a0<\/p>\n The tenor of dialogue at meetings with Treasury officials on 20 February and the minister of finance on 24 February 2025\u00a0<\/p>\n His apparent lack of trust in the RBNZ board, minister of finance and Treasury\u00a0<\/p>\n Whether he would be able to undertake his role with lesser funding.<\/p>\n The letter sought Mr Orr\u2019s response to the concerns raised.\u00a0<\/p>\n This is the \u201cstatement of concerns\u201d.<\/p>\n March 3<\/p>\n Mr Orr rejected the assertions in the letter but accepted that he considered there was a lack of trust between the parties.\u00a0<\/p>\n March 5<\/p>\n An exit agreement was reached between Mr Orr and RBNZ, which included Mr Orr agreeing to resign and for the board to withdraw the 27 February letter.\u00a0<\/p>\n The governor\u2019s resignation is announced<\/a>. The finance minister says she is disinclined to \u201ccharacterise the reasons\u201d. The chair of the Reserve Bank board, Neil Quigley, says the resignation is a \u201cpersonal decision\u201d from someone who \u201cfeels he\u2019s achieved the things he wanted to achieve\u201d.<\/p>\n An \u201cexit agreement<\/a>\u201d is negotiated between the parties, with terms including a \u201cnon disparagement\u201d clause.\u00a0<\/p>\n The board withdraws its \u201cstatement of concerns\u201d \u2013 the veracity of which the governor had questioned.<\/p>\n March 6<\/p>\n A paper was circulated to the RBNZ Board to:\u00a0<\/p>\n Approve the acceptance of the resignation of Adrian Orr\u00a0<\/p>\n Approve the exit agreement entered into\u00a0<\/p>\n Note the next steps are for the board to recommend a temporary governor.<\/p>\n March 14<\/p>\n Quigley sends a memo to the minister of finance, via the office of the governor (\u201cdue to the sensitive nature of the document\u201d), acquiescing to the reduction in funding sought. The board chair writes: \u201cThe proposed $750 million would represent a reduction of approximately $234 million or 24% over the five-year period compared to the RBNZ\u2019s anticipated expenditure for the current financial year (adjusted for inflation). While there is significant uncertainty in forecasting forward over a five-year period given the level of change required, the RBNZ board is fully engaged with the process of bringing the Bank\u2019s spending down from the level of the current year and to meeting the funding target that we are proposing.\u201d<\/p>\n He adds: \u201cIn making our proposal the RBNZ board has considered two fundamental challenges associated with change to RBNZ expenditure at the proposed level: 1. While some reductions in spending may be identified relatively quickly, any reductions in staffing in key operational areas will require careful consideration of operational risk and retention of core capability. The majority of this complex change will not be able to be completed in the current financial year so will result in costs in 2025\/26 and thus in the new FYFA.\u00a0<\/p>\n \u201c2. The culture within the Bank has evolved to embrace the funding uplift provided over the past seven years, and bringing Bank spending back to levels consistent with a FYFA of $750 million will involve changing that culture as well as reducing headcount.\u201d<\/p>\n April 1<\/p>\n A minute of the Expenditure and Regulatory Review Cabinet committee \u2013 also released yesterday \u2013 notes that the minister of finance has negotiated a new five-year funding agreement for $750 million and intends to sign the new agreement as soon as possible.\u00a0<\/p>\n The minister advises: \u201cThe Treasury has undertaken a review of the Reserve Bank\u2019s funding proposals, and I have discussed and agreed the final terms of the new funding agreement with the Reserve Bank\u2019s chair.\u201d<\/p>\n April 9<\/p>\n A funding agreement <\/a>is signed by Willis, Quigley and Hawkesby, with a total operating expenditure of $750 million across five years. It specifies that there will be no carrying over of any underspend year-to-year.\u00a0<\/p>\n Quigley says: \u201cOur new FYFA presents an opportunity for RBNZ to shape ourselves for the future. Our priority in the coming months will be to work with our people to redesign our way of working to optimise our resources while continuing to deliver on our mandate.\u201d\u00a0<\/p>\n April 16<\/p>\n A new five-year funding agreement for the Reserve Bank is announced <\/a>by the minister of finance, set at $750 million.<\/p>\n June<\/p>\n The Reserve Bank hires a senior lawyer in response to the finance minister \u201curging more transparency\u201d in official information responses \u201cand querying omissions in their summary of events\u201d, Willis will later tell the NZ Herald<\/a>. \u201cThey engaged a KC [King\u2019s Counsel] and pushed back on my view, emphasising their operational independence in responding to OIA requests.\u201d<\/p>\n June 11<\/p>\n Quigley attracts further criticism from experts and commentators <\/a>after rebuffing a question from an Interest.co.nz reporter <\/a>about whether he had met stated Reserve Bank commitments to transparency with the rejoinder: \u201cI\u2019m not interested in having you question me like you\u2019re a lawyer.\u201d\u00a0<\/p>\n August 25\u00a0<\/p>\n The prime minister, Christopher Luxon, explains <\/a>to Mike Hosking that he \u201ccan often give my views\u201d to the Reserve Bank governor (who chairs the Monetary Policy Committee) ahead of interest rate decisions.\u00a0<\/p>\n The Reserve Bank announces <\/a>that independent international experts Sir John Vickers, Thorsten Beck and Elena Carletti have been commissioned to \u201creview and challenge our analysis\u201d on minimum capital requirements.<\/p>\n (In response to questions from the Spinoff about whether preliminary advice had already been received from this group, the Reserve Bank acknowledged that the group had \u201cprovided some initial thoughts prior to consultation\u201d, but that \u201cthe views expressed in the consultation paper are those of the Reserve Bank\u201d. The spokesperson added: \u201cThe independent experts will provide their full and final views once they\u2019ve had the chance to have a detailed review of the consultation material and consider the feedback received on the consultation from stakeholders.\u201d The review process is expected to conclude in time for decisions to be made by the end of the year.)<\/p>\n August 28<\/p>\n The Reserve Bank releases <\/a>a timeline of events, as required by the chief ombudsman, following media complaints <\/a>about its responses to official information requests. (The full contents of that timeline are included in this timeline in italics.)<\/p>\n Quigley offers the following comment alongside the timeline: \u201cThe chief ombudsman has asked us to release a timeline of events covered by this information but has not required any additional documents or other information to be released. The chief ombudsman has also provided guidance on the different grounds that applied to withhold information and where the public interest lies. We therefore conclude that apart from being late with our OIA responses, the approach we took in responding to OIA requests was a reasonable one to the requests and met the overall public interest by balancing transparency with privacy and other legitimate concerns.\u201d<\/p>\n August 29<\/p>\nFormer Reserve Bank governor Adrian Orr (Photo: Hagen Hopkins\/Getty Images)<\/p>\n
Neil Quigley. Photo: University of Waikato<\/p>\n