mortgage commitments at lvrs over 80 percent, and has led to a significant reduction in high - lvr lending. ( figure 3 ) initially, we estimated that the lvr restrictions would dampen annual growth in house prices by 1 – 4 percentage points ; house sales by 3 – 8 percent, and credit growth by 1 – 3 percentage points over the first year that the policy was in place. the evidence to date suggests that the dampening effect of the lvr restrictions on house prices has been broadly in line with these expectations. house sales have fallen by 13 percent since september, and there are early signs that this is beginning to translate into weaker house prices and credit growth. 3 ( table 3 ) while lvrs have a financial stability purpose, they have been an important consideration in our monetary policy assessment. the dampening effect of lvrs on house price inflation and credit is expected to reduce wealth and credit effects on consumption that might have otherwise increased due to a rapid expansion in house prices. this, in turn, is estimated to have reduced cpi inflation pressures by an amount similar to a 25 – 50 basis point increase in the ocr. reserve bank simulations of the counter - factual – what would have happened to house price inflation in the absence of lvr speed limits – suggests house price inflation would have been about 2. 5 percent higher than its current level. we are continuing to monitor the effects of lvr restrictions and will publish new estimates of their impact in the reserve bank ’ s may financial stability report. bis central bankers ’ speeches earlier this month, in response to broadening inflation pressures, the reserve bank began an ocr tightening cycle after three years of no change in the policy rate. given that the lvr restrictions began to moderate the housing cycle from october 2013, the monetary policy tightening cycle might have needed to be more accentuated in their absence. while the main benefit of the lvrs has been to redress the impact of the easier lending conditions, they may also have helped to take some pressure off the new zealand dollar exchange rate. what if the policies had not been “ conditionally coordinated ”? while purely hypothetical, if these policy decisions were being made on a strictly independent basis, we may have seen macro - prudential policy ‘ wait ’ for the coming monetary policy tightening cycle to slow the housing market. an absence of any macro - prudential measures may in turn have prompted the monetary policy tightening to have started somewhat earlier. to be clear, the

percent of gdp, and rose to almost 50 percent at times during the seventies. those very high rates of investment, and the ability of traditionally poor, often agricultural, economies to pick up, off the shelf, very much more productive technologies from other countries have in turn made it possible to achieve extremely rapid improvements in labour productivity. thus for example, taking a peasant farmer employing a water buffalo and a wooden plough and giving him either a modern tractor and a plough, or a modern computerised lathe, is likely to see an extremely large increase in output per person. it seems clear that if a country has available some under - utilised labour, large amounts of capital and an ability to adopt the latest technology, perhaps through being open to foreign direct investment, it is possible to grow very quickly indeed during a ‘ catch - up ’ phase. but once a country reaches the developed country norms in terms of labour force participation rates, standards of education, and available technology, growth rates will also tend to slow to match the developed country norms. japan seems to have undergone that transformation in recent years. after growing at a very rapid pace that enabled it to transform itself over the post - war period from a rather poor and war - devastated country to one having per capita incomes amongst the highest in the world, japan ’ s growth rate over the past few years has been much closer to that of the ‘ more established ’ developed economies. lessons for new zealand : immigration policy, benefit policies, and education policy are all important what can we learn from this survey of growth in other countries that is relevant to new zealand today? the most important lesson is that if we wish to lift our long term growth rate - - our sustainable average growth rate - - we have to look to those factors that are important determinants of long term growth, namely the quantity and quality of the labour force, the quantity and quality of investment, and the other factors which determine the productivity with which labour and capital are combined. the supply of labour is largely determined by population growth and the proportion of the population which is engaged in employment. we can influence population growth to some extent, by our policy on immigration. the experience of australia, canada and the united states - - indeed of new zealand - - suggests that a well - considered immigration policy can have a significantly beneficial effect on an economy ’ s long - term growth rate not only by increasing the labour force but by bringing skills, market knowledge and capital. the proportion of the population