Adrian Is Out, With An Orr-fully Abrupt Exit. Let’s Move On. There’s “Opportunity” To Improve Here

• It's the end of an era at the Reserve Bank, with Adrian Orr’s abrupt resignation. The news flooded headlines on Wednesday. But ultimately Orr’s departure changes little to the outlook for monetary policy. And he was a Governor heavily criticized… justifiably. So lets move on.
• On-again-off-again tariffs continue to wreak havoc across markets. Trump implemented the largest tariff increase in nearly a century, only to be mostly reversed 48 hours later. We’re worried about the uncertainty and volatilty that could make busisnesses even more cautious. The downside risks to global growth are dominating. And that’s never good news for us here at home.
• Our COTW takes a look at the latest retail sales numbers for the end of 2024. An increase in discretionary spend over the quarter saw retail sales up 0.9%, while weaker spending earlier in the year saw sales remain relatively flat over the year.

Here’s our take on current events

March Madness truly kicked off in full swing last week. Despite no major local data releases, it was the news of Adrian Orr’s abrupt resignation along with swings in US trade policy that kept us busy.

After 7 years in the role, the now former RBNZ Governor, Adrian Orr, stood down from his post last Wednesday. The departure comes three years ahead of completing his second term. We were fiercely opposed to many of the RBNZ’s actions in recent years, from the near implementation of negative rates (which would not have worked), to the over stimulation and then heavy-handed hikes. Too much both ways. We’re moving on.

Deputy Governor Christian Hawkesby steps in as acting Governor until the end of the month. Hawkesby should be in the running for the big role, and is a safe pair of hands. From April 1, Finance Minister Nicola Willis, with recommendation from the RBNZ board, will appoint an interim Governor for up to 6 months. When thinking of who might come through as the next Governor a couple of names seem to be floating around the ring. Internally, Deputy Governor Christian Hawkesby and Assistant Governor Karen Silk are both seen as options. While externally, Dominick Stephens, who currently serves as the Chief Economic Advisor at the NZ Treasury, as well as John McDermott, the current Executive Director of Motu Economic and Public Policy Research, appear to be likely front runners. All great options.

For now, though, we wave goodbye to Adrian Orr. No one can deny that it was an incredibly difficult and unprecedented time. But perhaps the real kicker was the decline in communication and transparency from the Reserve Bank over Orr’s tenure. We look forward to a new governor as an opportunity for the Reserve Bank to improve its communication and transparency. We think it was fair to say the RBNZ was one of the most transparent in the world, and leaders in monetary policy… not today.

Questions have floated on what this means for the outlook of monetary policy. And the answer can be found simply by looking at the market’s reaction. Nothing. Ultimately, monetary policy decisions in New Zealand are made collectively by the monetary policy committee, based on forecasts done by the RBNZ’s staff. As such Orr’s departure is more of a political matter than an economic one.

The real driver in markets instead continues to be the moves out of the White House. In our last weekly, we wrote about how Trumps announcements seemed to hold a shelf life of mere hours. And that pattern has held true yet again. On Tuesday, Trump moved forward with imposing a 25% tariff on Mexico and Canada, alongside an additional 10% tariff on Chinese imports. These actions sparked swift retaliation from both Canada and China. Canada responded with a 25% tariff on $30bn worth of US imports – largely targeting US alcohol and home appliances. While China announced a 10-15% tariff across various agricultural imports from the US. Mexico also signalled plans to retaliate, with details to be announced over the weekend. But before we could even get there, come Friday morning, Trump had announced another one-month delay on tariffs for Canada and Mexico for goods shipped under North America's free trade pact. The pact only covers certain goods, so about 50% of US imports from Mexico and 62% from Canada may still face tariffs. Still, the delay was enough to pause retaliation from both countries.

But come April 2nd that may be a different story. That’s the day we’ll know whether these tariffs will be reinstated, as well as hearing more about Trumps plan on reciprocal tariffs. So, mark the date. But maybe do it in pencil. And keep an eraser close by.

Chart of the Week: A covid construction silver lining.

Five years ago, it was revealed just how vulnerable female employment was to the covid pandemic. The nationwide lockdown resulted in 11,000 fewer Kiwi in paid employment -10,000 of whom were women. It wasn’t surprising to see women account for the majority of the job losses. The service industry bore the brunt of restrictions on face-to-face contact. And women are overrepresented. Over 60% of sales workers and over 70% of hospitality workers are female. The lockdown had disproportionately impacted the workforce. Thankfully, the resulting job losses were short-lived. And a silver lining to come from the pandemic was the rise in women testing out other industries traditionally held by men. Construction in particular, no doubt helped by the previous free trades training policy in 2020. The construction sector has had a rough ride over the last couple of years. Tight financial conditions and a subdued housing market has weighed on construction activity and therefore employment. Nonetheless, there are significantly more women in construction. Since Covid, there are close to 50,000 women in construction, a 35% increase from 2019 levels.

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