The Reserve Bank will have its funding dramatically reduced over the next five years after reaching a new funding deal with the Government. 

In a statement, Finance Minister Nicola Willis said the deal worked out at about $150 million in annual operating spending - 25% less than the $200m budgeted for this year. 

In order to preserve its independence, the Reserve Bank is kept out of the annual government budget cycle. Instead, its board negotiates five year funding agreements with the finance minister. 

Willis said that the bank had initially requested $1.03b over the next five years. 

“Treasury advised me that that amount did not represent good value for money,” Willis said. 

Instead, the bank will get operating funding of $750m and capital funding of $25.6m for the period. 

The bank’s spending has grown dramatically in recent years - partly as it took on new functions. The 2015 funding agreement had the bank receiving about $50m a year in operating spending - a quarter of what is budgeted for the current year. 

“The Reserve Bank has grown hugely in recent years. Fulltime equivalent staff numbers increased from 255 in the 2017/18 year to 660 in January this year,” Willis said. 

“Benchmarking analysis performed by the Treasury shows that several of the Reserve Bank’s non-legislative functions, particularly in the People and Communications teams, appear overstaffed,” she said. 

Negotiations over the funding agreement had been one of two sore points between Willis and former Reserve Bank governor Adrian Orr, who abruptly quit in March, the other being the Government’s desire to see capital requirements for retail banks made less onerous. 

A recent Official Information Act release, which covered Willis’ talking points after Orr’s resignation, said the funding fight was not the cause of Orr’s resignation, which remains a mystery. 

Thomas Coughlan is the NZ Herald political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.