geoff bascand : communication, understanding, and credibility speech by mr geoff bascand, deputy governor and head of operations of the reserve bank of new zealand, to the admirals breakfast club, auckland, 6 december 2013. * * * i ’ m just a soul whose intentions are good oh lord, please don ’ t let me be misunderstood the animals central bank communication is again a renewed topic of interest. internationally, the expanded use of and debate about the efficacy of “ forward guidance ” – i. e. words that foreshadow the future timing of monetary policy actions – has attracted much attention. locally, the introduction of restrictions on low equity housing loans and the prospect of rising interest rates have been widely featured. central banks ’ communication strategies and their ability to communicate effectively have been challenged enormously by the events and consequences of the global financial crisis and by the emergence of new technology and social media. complexity increased, audiences expanded, and the immediacy and saturation of news coverage has turned the volume control on full. but as any parent of growing children knows, greater volume doesn ’ t always mean greater clarity! while arcane in some respects ( some will recall united states federal reserve governor alan greenspan terming his communication approach as “ constructive ambiguity ” 1 ), central bank communication is not an abstract topic. central bank pronouncements, their absence, and their tone, have economic and social impact. the reserve bank is extending its communication with the various groups that our activities impact. “ communicating on a broader front ” is one of our strategic priorities2 – both in imparting our messages and engaging with and listening to our many stakeholders. this is because communication is critical to the reserve bank ’ s success, with its actions and its communications symbiotic. in my speech today i will outline why clear communication of our policy thinking is so important, and the forces that shape the way we communicate. i will also discuss how our approach to communication has evolved, and the tools we use to reach our audiences. and finally, i will proffer some thoughts on where to from here. why, when and how should the reserve bank communicate? broadly speaking, the reserve bank seeks to achieve price and financial stability and protect the value of your money. our communications are ultimately geared to this purpose. these are important and sensitive matters, so understanding of, and confidence in our actions and messages – and indeed in the institution itself – is essential. this requires that our communication

bank ’ s operational policy design, its distributional impacts, and the legitimacy or autonomy of its decision - making. some have credited the bank with policy innovation and the willingness to act before a crisis eventuates. we have reiterated that lvrs are targeted at the primary objective of financial stability, but that there is also a potential benefit for monetary policy if they reduce the spillover of house price inflation into stronger consumer demand and higher price inflation for goods and services. explaining important inter - dependencies with other policies – our own or wider government ones – is vital. it is well - known that monetary policy “ needs friends ”, as the saying goes, born et al ( 2012, p249 ) state that macro - prudential policy is resulting in financial stability communications moving closer to the approach taken for monetary policy communications. he comments on the communications of lvrs in israel, which triggered very similar debates to those in new zealand. bis central bankers ’ speeches particularly supportive fiscal policies. macro - financial ( or macro - prudential ) policies can also benefit from supportive micro - economic policies ( e. g. productivity, housing, tax, regulation, etc ) whereby these reduce risks and enhance the economy ’ s growth capacity and performance. in these circumstances, we endeavoured to support policies that promoted housing supply, as a goal, without commenting on specific policy proposals ( spencer, 2013 ). iii. the expansion in regulatory responsibilities thirdly, we have acquired new, expanded regulatory responsibilities, in particular regulating nonbank financial deposit takers ( nbdts ) and licensing and supervising insurance companies13. the bank ’ s stakeholder engagement has changed significantly, whilst expectations upon it and its public persona as a guardian of financial soundness and efficiency have been magnified considerably. in terms of expanded regulatory responsibilities, the communication challenges to date have been more stakeholder management related ( understanding the regimes ’ operation and building trust in our regulatory relationship ) rather than widespread public discourse. taking on additional regulatory responsibility for insurers and non - bank - deposit takers means we are dealing with everyone from bank chief executives to building societies to small mutual insurers. these regulatory responsibilities were assigned to the bank out of a concern to avoid financial failings, such as we saw with finance companies and in the insurance sector. the challenge here is that public expectations may well be at odds with regulatory and supervisory responsibilities and realities. we have communicated that we do not operate a no - failure regime ( see