Adrian Orr says he doesn't 'have anything more to answer' amid Nicola Willis' accusations of 'wildly wrong' inflation projections

Adrian Orr says he doesn't "have anything more to answer" on the Reserve Bank's inflation projections amid accusations from the National Party it got them "wildly wrong".

But Orr, the central bank's (RBNZ) Governor, said the "world keeps on moving". He told National Party Finance spokesperson Nicola Willis on Thursday the bank's projections were about "where we are standing today".

It comes after the release of the RBNZ's monetary policy statement (MPS) on Wednesday, which predicted inflation had peaked and the central bank could, soon, hit the pause button on its lengthy tightening cycle.

The RBNZ did slap borrowers with a 25 basis point Official Cash Rate hike on Wednesday but it's hoped this would be the last rise.

Orr appeared before Parliament's Finance and Expenditure Select Committee on Thursday, where he rejected questions from Willis about whether the RBNZ had failed its mandate of bringing inflation back down between its target range of 1 and 3 percent in the medium-term.

The latest consumer price index figures, released in April, had annual inflation at 6.7 percent. Wednesday's MPS projected inflation would drop back to within the target range in the second half of next year.

Willis asked Orr on Thursday why the RBNZ got earlier predictions "so wrong", given this time last year the bank projected inflation would've dropped below 5 percent by now. 

"Because the world keeps moving on," Orr replied. "Our projections are always about, 'Given where we are standing today, given how we assess the economy to work and given no future shocks, this is the likely path of monetary conditions to achieve what we need.'"

He said the RBNZ's OCR predictions also differed from this time last year.

Orr went on to say the RBNZ had adapted its monetary policy "as new information comes to the table".

"What have we seen since back then? Well, one quite obvious thing has been global food prices, as an example," he said before Willis interrupted him to say the "global commodity index has food prices coming down".

"Yep, they're coming down," Orr said. "Have they come down… domestically, here?"

He was again asked by Willis if it was a problem the RBNZ got its assumptions "wildly wrong".

"The committee also adjusts the monetary conditions based on the information that comes to hand so I don't have anything more to answer on that."

There were concerns the RBNZ may have to hike the OCR higher than initially expected after extra spending in the Budget produced by the Government last week, much of which had gone towards the recovery from Cyclone Gabrielle. However, that didn't come to fruition.

Nicola Willis and Adrian Orr.
Nicola Willis and Adrian Orr. Photo credit: New Zealand Parliament

Speaking before Wednesday's OCR decision, Prime Minister Chris Hipkins said the Budget was put together carefully to reprioritise funds for the cyclone recovery.

However, he acknowledged it was a difficult time for homeowners.

"The cyclone, the floods in Auckland, we said that we were going to see these communities through that. There's an inflationary effect of that," Hipkins admitted. "The alternative is to say, well, 'We're not going to do something about all of the work that needs to be done because we're worried about the effect that's gonna have on inflation.' That's not something the Government was willing to consider."