The banking world is reacting to the recent news that Alan Bollard, Governor of New Zealand’s Central Bank, will step down after ten years at its helm. Famous for his tight control of interest rates, he guided the central bank through a period of both highs and lows, economic prosperity and then into the global downturn. The bank has said it will look for a successor both within and outside New Zealand. Now that the central bank has sole responsibility for setting interest rates within the country, the economic impact of this position will take time to find an appropriate successor.
Bollard, a New Zealand native, graduated with a PhD in Economics from the University of Auckland in 1977. Within ten years he had been appointed head of the New Zealand Institute of Economic Research and remained in that post for seven years. Beginning in 1994 he headed New Zealand’s Commerce Commission for four years, then served as Secretary to the New Zealand Treasury until 2002. In September of that year he was appointed governor of the Reserve Bank of New Zealand and has served in that capacity ever since. He has also been involved in either writing or editing three books about New Zealand’s economy.
Bollard has brought a wide range of economic and fiscal experience to the bank, including working to enhance the transparency of the decision-making process. He worked to promote bank regulation so that New Zealand, rather than Australian rules, would prevail. He is also a proponent of sharing information with other, similarly situated central banks, working closely with the Bank of Norway and Singapore’s Central Bank. Modelling best practices is a way he believes New Zealand is able to exert greater control over the actions that will best suit its economy and people.
Several replacements have been suggested for Mr Bollard, including the Deputy Governor, a man by the name of Grant Spencer. Mr Spencer is also the Head of Financial Stability and would be a logical choice, although as an internal candidate he might not bring as much “fresh blood” to the position as an outsider would. Another internal candidate is the Assistant Governor, Dr John McDermott, who is also Head of Economics.
External candidates could include Murray Sherwin, former Deputy Governor of the Reserve Bank of New Zealand. He currently serves as chair of the Productivity Commission. When asked about the possibility of such an appointment, Mr Sherwin declined to comment, as did Arthur Grimes, currently Chairman of the Reserve Bank of New Zealand.
Until he leaves, Bollard has stated he will remain fully engaged and focused on continuing the work he has been doing to help New Zealand emerge from the worldwide economic downturn. Events in the Eurozone countries, as well as the United States and China, are placing economic challenges on the country’s economy, all of which he said he is committed to help resolve.
