and perseverance are needed. effective poverty reduction requires that the recipient countries receive consistent support from donor countries, international financial institutions ( ifis ), and un organizations to help them pursue the right policies unswervingly for very long periods. angus maddison, the world economy : a millennial perspective, oecd 2001. james boughton, who ’ s in charge? ownership and conditionality in imf - supported programs, imf working paper wp / 03 / 191. i believe that if we follow through with the elements i have outlined, developing countries stand a reasonable chance to eradicate poverty. therefore, i do not think it is productive to constantly start new initiatives to fight poverty, which i also judge to be a sign that the involved parties are not willing to live up to their responsibilities. poverty will only be eradicated by economic growth, which also depends on integrating in particular african countries into the world economy and offering them fair and equitable access to markets in developed countries. trade is one of the best forms of self - help. therefore, it was very disappointing that the multilateral trade talks in cancun failed a few weeks ago. however, at the annual meetings of the imf and the world bank in dubai, there was a general consensus that the parties have to return to the negotiation table as soon as possible. ladies and gentlemen : next to the fight against poverty, i perceive the strengthening of the international financial architecture as a major challenge. since the asian crisis, the international financial system has undergone significant reform. an important outcome of these reforms has been the relative resilience of international financial markets to a series of shocks over the past three years : owing to the decisive intervention and cooperation of the federal reserve system and the eurosystem, september 11 did not produce a major financial crisis, the synchronised economic slowdown of major industrial countries has not led to any major stress in the financial system, and the financial meltdown in argentina did not entail any significant contagion except on uruguay, which proves that financial market agents may be pricing risk better and have become more discriminating without falling into irrational herding behavior. i see that particular progress has been made on three fronts : first, the international dialogue has been broadened and has been made more inclusive. the committees of the bis as well as the creation of the g - 20 have enabled emerging market countries ( emcs ) as well as developing countries to get involved in the

widened set of objectives. on one hand, we appreciate the constraints faced by other institutes, and the peril that may have resulted from the crisis had central banks not stepped up to the task. on the other hand, central banks are sometimes expected to solve phenomena that are structural in nature, and that do not sit easily within the conventional realm of monetary policy. at the reserve bank, we are always exploring new policy options to meet our broadened mandate. in particular, we believe clear and honest communication injects not only certainty for decision makers, but also confidence to the public moving forward. i will elaborate on these points below. uncertainty and economic slowdown uncertainty and economic slowdown go hand in hand. 3 uncertainty weighs on business confidence and makes firms hesitant to invest. this slows growth and holds down productive capacity. in our recent business visits, the biggest reported barriers to investment were : policy uncertainty, particularly for infrastructure projects and environment policy ; regulatory requirements ; construction capacity constraints ; and access to finance. 4 figure 2 : falling business confidence is slowing business investment and gdp quarterly survey of business confidence, and stats nz. 3 see rice, vehbi, and wong ( 2018 ) for analytical work on uncertainty. 4 see the november monetary policy statement, box 1 for the results of our recent business visits. business uncertainty highlights the importance of forward guidance and transparency when considering and setting economic policy. even if the message isn ’ t one that businesses want to hear, decision makers in business appreciate clarity and certainty. in addition to the cyclical impact of uncertainty on business investment, there are also signs of a structural decline in business investment since the great financial crisis. 5 if business investment remains low, this has a negative effect on our long - term prosperity. our capital stock and productivity will struggle to develop, dragging down potential gdp growth. new zealand ’ s productivity growth has already been slow for some time. 6 breaking out of this will require greater investment in technology, education, and infrastructure. the reserve bank cannot directly make the investments the economy requires — this will have to come from the private sector and government. however, we can play a supportive role, which i will come to shortly. first, let ’ s finish with the other impacts of uncertainty. from a central bank perspective, uncertainty has one clear impact : it makes our job harder. good monetary policy depends on reasonable forecasts. high uncertainty makes forecasting harder. there is more noise in the data and forecasts are more subject to