NZ central bank governor to step down The Reserve Bank of New Zealand governor Alan Bollard is to step down in September after deciding not to seek a third term in office. His departure, after a decade in the job, comes as New Zealand struggles with sluggish economic growth, a strong domestic currency and increased funding costs for its banks. The country is also about to embark on a large privatisation programme, selling stakes in four state-owned companies: Meridian, Mighty River Power, Genesis and Solid Energy. Adrian Orr, a former chief economist at Westpac and the current head of the New Zealand Superannuation Fund, is tipped by analysts as the most likely successor given his experience of financial markets. However, analysts said an internal candidate, such as Grant Spencer, the RBNZ's deputy governor, could not be ruled out. "The changing nature of the financial system is one of the biggest challenges facing New Zealand," noted Paul Bloxham, HSBC's chief economist for Australia and New Zealand. The next governor will be appointed by New Zealand's finance minister on the recommendation of the RBNZ board, which plans to look at home and abroad for Mr Bollard's successor. Described as a steady hand and pragmatic, Mr Bollard, aged 60, raised interest rates to a record 8.25 per cent in 2007 in an effort to contain inflation, and held rates there until the middle of 2008. He then slashed them to a record low of 2.5 per cent to support the economy during the global financial crisis. He largely resisted calls to intervene in the foreign exchange market to weaken the New Zealand dollar, acting only once in June 2007 to slow the rise of the Kiwi and rampant speculation in the country's government bonds. Mr Bollard said he would remain focused on the serious economic and financial challenges facing New Zealand in his remaining eight months in office. "The Bank is ready to respond to ongoing developments overseas, especially in Europe, the US and China, as well as domestically, particularly the Canterbury earthquakes," he said of last year's disaster in Christchurch that left more than 180 people dead. The Kiwi, one of the best performing currencies in the world so far this year, was little moved by Mr Bollard's announcement, trading at around 82 US cents. In August last year, the Kiwi surged to 88.43 cents, the highest level since exchange controls were lifted in 1985. The governor of the RBNZ is a more powerful position than at many central banks. Not only does the governor set interest rates - rather than a committee - he also overseas the financial system. The RBNZ was one of the first central banks to be given independence and an inflation target.