The reappointment of the Reserve Bank Governor has the opposition reeling, and a leading economist says they have a point with "legitimate concerns" over monetary policy decisions.
Infometrics principal economist Brad Olsen told Oriini Kaipara on AM the process of reappointing Adrian Orr has been "frustrating" and "a bit disappointing".
"We know that the Reserve Bank's position as independent has got to be top of mind and importantly, we haven't often seen politics really get into the Reserve Bank."
The National Party and ACT were furious after Orr was reappointed as the Governor of the Reserve Bank of New Zealand (RBNZ) for another five-year term on Tuesday.
Finance Minister Grant Robertson said Orr has been "instrumental" in seeing the RBNZ through a period of "considerable" change and his reappointment will allow him to "ensure these changes are bedded in".
However, National's finance spokesperson Nicola Willis wrote to Robertson in September, saying the party did not support Orr's reappointment and repeated calls for an independent review into the central bank's performance.
Olsen said "legitimate concerns" were raised when Roberton consulted over the reappointment with the opposition.
"That consultation happened a few months back where the opposition, in my mind, raised some quite legitimate concerns around how monetary policy has gone through over the past couple of years and about the performance of the Reserve Bank," Olsen said.
"Their job is to keep inflation under control and it's far outside that at the moment. Yet you have had unanimous support through from the board of the Reserve Bank recommending the reappointment of the Governor."
Olsen said the questions about monetary policy decision-making over the past few years have "fallen on deaf ears".
"I think that is concerning given for the first time it means that we do have disagreement at a political level over who heads the Reserve Bank," Olsen said.
National has been calling for an independent inquiry into monetary policy decision-making during COVID.
"We have repeatedly urged the Government to conduct an independent review of the Reserve Bank's performance before endorsing the Governor for another five years. Re-appointing him without first completing such an inquiry is a serious mistake," Willis said on Tuesday.
Olsen said the decisions the RBNZ makes are so important to peoples' lives and deserve discussion.
Looking to the future, Olsen said expectations are that the RBNZ will raise the Official Cash Rate (OCR) by another 75 basis points.
"Inflation remains persistent, it remains pervasive, it remains problematic," he said.
Olsen said there is a lot of caution around raising the OCR because while it is needed to tackle high inflation, there is a concern we might "overcook it" and see the economy hit harder than intended.
"It will be a tightrope balance for the Reserve Bank."
