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RBNZ was a tidy earner under Wheeler, with almost $1B of dividends to the Crown

Friday 29th September 2017

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The Reserve Bank of New Zealand kept its dividend largely unchanged in the 2017 financial year, taking the total returns under former governor Graeme Wheeler's stewardship to $990 million. 

The Wellington-based central bank reported a surplus of $155 million in the 12 months ended June 30, up from $52 million a year earlier, as it booked smaller unrealised foreign exchange losses of $66 million from a 3 percent appreciation in the trade-weighted index. In 2016, that unrealised loss was $201 million. The Reserve Bank paid a dividend of $145 million to the government, up from $140 million.

The central bank is self-funding through the substantial pool of assets it holds, and its funding agreement with the minister of finance sets out how much of that income can be retained to meet its operating costs. 

During Wheeler's five-year term as governor, the central bank paid $990 million in dividends to the Crown or 83 percent of the $1.2 billion of surpluses it generated. That compares to $1.5 billion, or 94 percent of the $1.59 billion of surpluses, in his predecessor Alan Bollard's second term. The government introduced a new dividend policy for the Reserve Bank in 2009 that included foreign exchange movements when calculating the distribution if there was an expectation gains would be crystallised. 

The central bank's open foreign currency position, which reflects the moving valuation, shrank $100 million to $2.9 billion as at June 30 from a year earlier. 

Wheeler said the bank continued to operate within a tight five-year funding agreement, which finishes in 2020. Operating expenses were flat at $68.8 million.

The board's report on Wheeler and his team, signed by chair Neil Quigley and deputy Kerrin Vautier, was largely upbeat saying they "performed to a high standard in carrying out their functions and discharging their responsibilities during the past year."

On monitoring the central bank's relationships, the board noted it was a "continuous process" and that it took "a number of opportunities to observe how these were operating in practice, paying particular regard to any feedback on the messaging, transparency and accountability of the bank."

The central bank's communications were criticised by the media and financial analysts last year when traders were wrong-footed by a speech from Wheeler when he said he didn't need to take a "mechanistic" approach and only take headline inflation into account when setting policy, only to cut the benchmark rate at his next meeting due to softening inflation expectations.

One of Wheeler's more ardent critics was Bank of New Zealand head of research Stephen Toplis, whose commentary ahead of the May monetary policy statement earned a sharp rebuke from the then-governor to Toplis's boss, BNZ chief executive Anthony Healy, seeking to rein in the critical tone. 

Wheeler refused to comment on the exchange, Quigley said it wasn't something he would talk about in public, and Finance Minister Steven Joyce shied away saying it was a matter for the governor. 



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