Frontrunners emerge to take over Bollard's Reserve Bank job

Reserve Bank deputy governor Grant Spencer is seen as the frontrunner to replace governor Alan Bollard. An announcement expected either later this week or early next week.

However, BNZ senior economist Craig Ebert said yesterday former World Bank managing director Graeme Wheeler would be a strong contender if he had decided to apply.

The Reserve Bank board makes the appointment.

Mr Wheeler, a New Zealander, joined the World Bank in 1997 after holding the position of treasurer at the New Zealand Debt Management Office and deputy secretary at the New Zealand Treasury.

In 2007, he was reported to be among the leading contenders to replace Paul Wolfowitz as World Bank president when Mr Wolfowitz quit after a scandal over a generous pay and promotion package he arranged for his girlfriend, a bank worker.

Previous positions held by Mr Spencer at the central include assistant governor and head of economics and chief manager, financial markets. Between 1995 and 2004, Mr Spencer worked for the Australia and New Zealand Banking Group (ANZ).

Asked about the likelihood of either Mr Spencer or Mr Wheeler being appointed, Mr Ebert said anything was possible.

"Alan Bollard was a surprise ... But if we had to hone it down to a few names, then Spencer and Wheeler are at the top of the list."

A new policy targets agreement would be negotiated between the Government and the new governor but Mr Ebert was not expecting any changes to Reserve Bank policy with the appointment.

"It will be very much business as usual with the official cash rate and a focus on inflation.

"There may be some changes brought to prudential supervision - part of the tool box the Reserve Bank is establishing."

Looking ahead, Mr Ebert said there remained uncertainty in global markets that would be a focus of the Reserve Bank but the BNZ was still clear in its view there would be a slow recovery in New Zealand.

Plenty of people had said the economy could not survive the European cash crisis, the earthquakes and the Greek elections, he said.

"We are not predicting a strong recovery but unless something major happens in the world that we cannot avoid, the slow recovery will continue," Mr Ebert said.

Foreign exchange analysts say the New Zealand dollar may fall this week as European policymakers meet to discuss their responses to the region's sovereign debt concerns at a summit in Brussels.

The New Zealand dollar traded as high as US78.95c yesterday - right in the middle of this week's predicted trading range of US76.50c to US80.60c, according to a poll of five analysts in a BusinessDesk survey.

At 5pm, the dollar was trading at US78.84c, still around the middle of the range.

The New Zealand dollar held near a seven-week high as German Chancellor Angela Merkel, Italian Prime Minister Mario Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy agreed to lobby for a European Union growth plan worth up to 130 billion ($NZ207 billion).

Mrs Merkel continues to resist calls for funds to be used to buy bonds of troubled nations.

She is under pressure to do more to stem the crisis as EU leaders prepare to meet on Thursday.

"Markets will be nervous this week waiting for the euro zone council result," Westpac Banking Corp market strategist Imre Speizer said.

"We are not going to see much out of the euro zone till Friday.

"They need to table something substantial and if they don't, markets will be disappointed come Monday morning."