Former World Bank Managing Director Graeme Wheeler was named New Zealand’s next central bank governor, inheriting a policy of record-low interest rates and the best-performing Group of 10 currency this year.
Wheeler’s “extensive experience makes him a highly respected figure in world financial markets and within New Zealand,” Finance Minister Bill English said in a statement today. He will succeed Alan Bollard, who served in the position for a decade and whose term ends Sept. 25, English said.
The Reserve Bank of New Zealand is changing leaders near a possible turning point for rates that have been on hold for 15 months, as Europe’s fiscal crisis and a stronger currency threaten to slow export growth while rebuilding after a series of earthquakes is set to accelerate next year. The official cash rate has been 2.5 percent since March 2011, with a 62 percent chance of a rate cut before year end, according to interest-rate swaps data compiled by Bloomberg.
The local currency bought 78.93 U.S. cents at 3:44 p.m. in Wellington, compared with 78.71 cents immediately before Wheeler’s appointment was announced. The so-called kiwi’s 1.5 percent increase against the U.S. dollar this year is the biggest among G-10 currencies tracked by Bloomberg.
“Bringing in new blood, a fresh perspective, is often a good thing,” said Robin Clements, chief New Zealand economist at UBS AG in Christchurch. While Wheeler has experience monitoring the domestic and international economies, “we don’t know a lot about his views,” Clements said.
New Zealand’s central bank governor has sole responsibility for rate decisions, and Wheeler is being appointed as Europe’s turmoil restrains consumer confidence and threatens to curb exports, which make up 30 percent of the economy. The RBNZ, among the first central banks in the world to adopt an inflation target, is required to keep consumer-price gains in a 1 percent to 3 percent range.
Wheeler, a New Zealand citizen, will be governor-designate until a new policy targets agreement is finished in the “next few months,” which is required before the appointment of a new governor, according to the statement.
English said he doesn’t envisage any “major changes” to the agreement when Wheeler succeeds Bollard.
“However, the global financial crisis has focused some attention on monetary policy frameworks, and I want to ensure that the PTA continues to reflect best international practice,” English said.
Wheeler, 60, worked at the World Bank from 1997 to 2010, according to the statement. He was appointed treasurer of the Washington-based lender in 2001 and became one of two managing directors in 2006. He stepped down from the role in June 2010.
The Financial Times reported in 2007 that Wheeler was the decisive voice that left Paul Wolfowitz with no option but to resign as president of the bank. Wolfowitz quit in May 2007 amid a furor over a pay raise he arranged for his companion.
In his World Bank speeches, Wheeler has called climate change “the defining issue of our time,” focused on the plight of the poor during economic downturns and said Benjamin Franklin might have added financial cycles to his list of certainties in life -- death and taxes.
“One might hope that the frequency and amplitude of financial cycles would diminish as governments improve their economic management through initiatives such as medium-term financial strategies, fiscal responsibility rules, more independent central banks, flexible exchange rates and prudent balance-sheet management,” Wheeler said in a June 2008 speech in Washington. “One might hope, but one should not be confident.”
In the remarks four years ago, he said “the days of boom and bust in financial markets will continue” as “the desire for reward and the fear of danger are too hard wired into the human condition for these to disappear.”
Elsewhere in the Asia-Pacific region today, the Philippines said imports fell and the trade deficit narrowed in April. The government reported a budget shortfall for May as spending rose. Singapore’s industrial production probably rose for the first time in three months in May, economists surveyed by Bloomberg predicted before a report due today. Hong Kong will also report trade data.
The MSCI Asia Pacific Index slid 0.5 percent at 12:54 p.m. in Tokyo, the fourth straight trading day of declines.
Consumer confidence in Germany will probably ease in July, according to a Bloomberg News survey ahead of a GfK SE (GFK) forecast due today. French consumer confidence may have slid in June, a separate Bloomberg survey showed. Italian retail sales and Dutch gross domestic product data are scheduled for release today. In the U.S., a Conference Board report will probably show consumer confidence fell in June, according to a Bloomberg survey.
While at the World Bank, Wheeler had been cited by local analysts in 2002 as a potential successor to previous RBNZ Governor Don Brash. New Zealand’s government appoints the central bank chief on the recommendation of the RBNZ’s seven non-executive directors.
The nation’s economy expanded 1.1 percent in the first quarter from the prior quarter, the most in five years, according to a government report on June 21. Still, consumer confidence fell in June to the lowest level in more than a year, ANZ National Bank Ltd. said June 15, citing a Roy Morgan survey of 1,040 people.
“Political and economic stresses in Europe, along with a run of weaker-than-expected data, have seen New Zealand’s trading partner outlook worsen,” Bollard said in a statement June 14 announcing no rate change. “The bank is monitoring euro-area developments carefully given the potential for rapid change.”
Wheeler, who played cricket for Wellington in 1982, worked at the Treasury Department for 24 years, including as director of macroeconomic forecasting and a five-year term as treasurer of the New Zealand Debt Management office. He lives in the U.S., where he operates his own advisory business, according to English’s statement.
Today’s appointment is the fourth consecutive time since 1982 that the Reserve Bank has selected an external candidate. Bollard was the third straight external appointment when he moved to the RBNZ from the Treasury Department in 2002. Brash was chief executive officer of WestpacTrust, the local unit of Westpac Banking Corp. (WBC), when he has named in 1988 and Spencer Russell was chief executive of the National Bank of New Zealand Ltd. when appointed in 1984.
“We don’t foresee any changes in the conduct of monetary policy in the short term,” said Michael Gordon, a Westpac senior economist in Auckland, said in a research note today. He said Westpac expects the next rate increase in March, “once the new governor has settled in.”
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