korea into an advanced central bank, and see to it that our positive transformation to meet the expectations of the public can be constantly sustained. we are in the meantime reflecting on the fact that our scores in the evaluation of anti - corruption competitiveness and integrity conducted by a national agency last year were low, and working to make up for our imperfections. although the evaluation criteria used for us differed from those applied to other comparable organizations, without making an excuse of this we must, if we are to take pride in being a central bank, exert efforts to not consider any matter of public business as trifling but do our utmost and become role models for others. none of these are easily achievable tasks, of course, but we must join forces to see all these changes through. and under no circumstances should we ourselves underestimate our potential. until the global financial crisis ends we must not relax our guard, so as to avoid rigidity and be meticulous in responding flexibly to the changes in global economic conditions. you may well remember that one year ago today, in this place, i urged that we carry out our newly - given financial stability mandate well, achieve the inflation target, and pursue institutional reforms that meet the public ’ s expectations. and i do not think it would be praising ourselves too much even if we say that we have achieved these three goals without difficulty. this goes to show what we are capable of, even under anything but easy conditions at home and abroad, and so let us keep on changing so that one year from now, when we gather again in this same place, we can confirm the changes in ourselves. bis central bankers ’ speeches we should bear in mind that history has always found its way to new solutions in response to crises, and has not returned to the past. this means that a future we have not expected is unfolding before us. if a crisis has erupted for unexpected reasons, who knows but that the post - crisis economy may also evolve to form a new paradigm of a state beyond our imagination. it is very difficult to adopt a new attitude. there is an african proverb that says “ if you want to go fast, go alone. if you want to go far, go together. ” it is said to be because when you are going far you cannot avoid dangerous animals. in the face of the greatest financial crisis of this new century, and even more for us who have worked in a rigid organization for so long, if

* – potential output the neutral interest rate and the economy ’ s potential output are interrelated, with both factors sharing common drivers. potential output, or y *, is the level of output that is sustainable, and is a useful conceptual tool in gauging aggregate output consistent with stable inflation. 14 in our 3 / 11 bis central bankers'speeches framework, the difference between the actual level of output and the level of potential output – the output gap ( figure 2 ) – is a key influence on inflation. in the short - run, frictions such as stickiness of nominal wages and other prices can prevent the economy from achieving its potential output when it is hit by a shock. when an economy is running ahead of its potential, a positive ‘ output gap ’ is said to exist, where pricing pressure increases in order to ration demand on scarce resources ( such as capital and labour ), boosting general inflation. the longer output is away from its potential, the greater the adjustments costs incurred as output converges back to potential. sustaining growth and minimising these adjustment costs is highly desirable, given how much recessions hurt social and economic outcomes. 15 neither potential output nor the output gap can be directly observed. ultimately, estimating potential requires determining whether movements in observed output are temporary cyclical movements, or permanent changes to the economy ’ s structure. to estimate potential output, we use a production function approach that combines the inputs of production — labour and capital — along with total factor productivity. 16 we have a range of uncertainty with respect to the output gap ; around ± 2 percent of potential output. given the challenges in estimating potential output in real time, 17 we cross - check the results from this approach against a number of other potential output estimates, including estimates from time - series models, and fully - estimated structural models. 18 moreover, the estimate for the output gap is checked against a range of measures, including indicators from 4 / 11 bis central bankers'speeches the labour market and business surveys. 19 given the important role that the potential output estimate ( and thereby the output gap ) plays in influencing inflation pressure, these estimates garner considerable discussion and scrutiny as part of the policy process, and are judgementally - adjusted as necessary. potential output growth in new zealand is currently estimated to be 2. 9 percent per annum ( figure 3 ). the current strength of potential output growth has been driven by growth in the labour supply ( especially strong net immigration flows ) and the capital stock.