, in new zealand we have placed priority on strengthening liquidity standards even before increasing capital ratios. 3. global recession, 2009 – 10 the rapid deterioration in financial and economic conditions in late 2008 and early 2009 quickly caused a collapse in business and consumer confidence, exacerbating the interruption of economic activity across the world. cross - border spillovers through regional supply chain structures and global customer markets were accelerated by short - term funding disruptions, such as in trade finance. now economies without large direct financial exposures to “ toxic ” assets, such as asian export - oriented economies, were sucked into the downdraft. the abrupt marking - down of the outlook for western growth and consumption of high - value goods saw inventories pile up, especially in those countries positioned as manufacturing hubs or producers of capital goods. in six months or less, industrial production in japan, singapore and korea, for example, fell 30, 25 and 19 percent respectively. the damage to bank balance sheets from suspect loans and marked - down asset valuations, as well as the sudden exit from the scene of many financial intermediaries, showed up in restricted lending capacity and greatly expanded funding spreads. accordingly, those non - financial firms and households that still wanted or needed credit either had to pay elevated rates or to deleverage, further depressing activity. when central banks recognised the magnitude of the recessionary forces in train, they cut policy interest rates very quickly ( figure 4 ). in some northern hemisphere markets, the dysfunction in the financial system had loosened the link between official policy rates and lending rates to firms and households. as well as cutting official interest rates, the us federal reserve and the bank of england stepped in directly to key credit markets to lower interest rates in those markets. bis central bankers ’ speeches figure 4 policy interest rates source : bloomberg. the relatively high level of interest rates before the recession meant that deep cuts were possible. the new zealand and australian reserve banks, for example, cut policy rates by 575 and 425 basis points respectively between july 2008 and april 2009. crisis then brought opportunities. monetary policy researchers had always wondered what might happen if price inflation and interest rates approached zero in several major countries, or even went negative. now we would find out. the case of japan no longer seemed so unique. as monetary policy interest rates approached zero in a number of advanced countries, some central banks began to try to influence general financial conditions through “ unconventional ” tools, meaning tools other than the official short term

, or real, price of many of the items which they produce has been declining, and that for a long period. the new zealand meat and wool boards ’ economic service tells me that between 1948 ( prior to the korean war boom ) and 1996, the inflation - adjusted price of lamb fell by 45 percent in the us market ; the price of dairy products fell by 55 percent ; the price of beef fell by 69 percent ; and the price of wool fell by 79 percent. i don ’ t know that anybody was noticing the price of kiwifruit in the us market in 1948, but i can still recall that in 1982, just 15 years ago, the orchard - gate price of new zealand kiwifruit was $ 11 per tray. nobody yet knows what we will realise in 1997, but if the orchard - gate price for this year ’ s crop is, say, $ 4. 30 per tray, that will be an inflation - adjusted fall in the orchard - gate price of some 85 percent in just 15 years - and that over a period during which the new zealand dollar has fallen quite substantially against the currencies of virtually all our trading partners, and especially against the japanese yen and the german mark, the two currencies of most direct relevance to kiwifruit exports. the basic reality is that the market price of kiwifruit has fallen substantially over that time. and in case new zealand exporters feel hard done by by this reality, remember that very substantial falls in inflation - adjusted prices are common for most commodities, and indeed for a great many other goods and services as well. productivity improves, and international competition often ensures that the benefit of that improvement is passed on to consumers, rather than retained by producers. reflect on the huge fall in the real price of computers - a fall which dwarfs the falls suffered by new zealand land - based exporters - or the price of television sets, or of motor vehicles, or of international air travel, or of long - distance telephone calls. large price falls are by no means unique to the products which new zealand exports. to remain viable, all producers must be constantly seeking new ways to improve productivity or add value, and if they do that successfully, they can maintain profitability despite a trend decline in prices. finally, apart altogether from the tendency for the prices of many commodities to decline in the long term, commodity prices tend to be volatile and in recent years this volatility has tended to swamp the impact of