monetary policy : a compass point in uncertain times panel remarks delivered to federal reserve bank of san francisco on 14 november 2019 by adrian orr, governor1 1 my thanks to cameron haworth and eric tong for their contribution to these notes. 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz introduction tena koutou katoa, thank you for inviting me to this panel discussion. it is a pleasure to speak on a topic that is so relevant to a small open economy like new zealand — the effects of uncertainty and dampened global growth on monetary policy. heightened global uncertainty and slower international trade have contributed to a weakening in global growth since mid - 2018. much of the uncertainty is related to global developments, such as brexit and the trade tensions between us and china ( figure 1 ). in new zealand, although some measures of uncertainty are relatively subdued, this may simply reflect a consensus that low growth is likely to stay in the near future. figure 1 : uncertainty indices for new zealand and the world trade tensions brexit source : bloomberg, rbnz estimates ( based on rice, vehbi, and wong, 2018 ). in light of this, it is vital that monetary policy acts as a compass point for decision making. we can do this by : remaining focused on our core objectives ; adopting a risk - management approach for making monetary policy decisions ; and working in concert with all available policy levers — not as a lone force. for new zealand, this means setting policy to achieve our price stability target and support maximum sustainable employment. it means acting decisively to prevent an unnecessary worsening in economic conditions and the un - anchoring of long - term inflation expectations. and it means recognising the limits of monetary policy. monetary policy has been relied on heavily over the past two decades given its success of anchoring inflation expectations and assisting the recovery from the great financial crisis, 2 but it is not a long - term growth panacea. 2 see rogoff ( 2019 ). today i would like to discuss three topics : the impact of uncertainty on the new zealand economy ; how monetary policy in new zealand is responding to these issues ; and how clear communication and open - mindedness to new policy tools may help implementing our broadened mandate. in discussing these topics, i will touch on how, since the great financial crisis, central banks have been tasked with a

, let ’ s take advantage of the window of opportunity offered by the directive ’ s review, and push for four priorities that are essential for financial stability and for the sound financing of the economy : ( i ) all things being equal, the revision must not lead to an increase in capital requirements for the european insurance industry. ( ii ) it would be counterproductive to artificially lower the capital requirement by stopping equity investments. but despite the advances obtained in 2018, this asset class is still being penalised. we are therefore calling for a reduction in the shock applied to all equity categories, to make the standard easier to read and reduce insurers ’ capital charge. “ insuring in the long term ”, to come back to today ’ s topic, means providing our mtes and smes with greater access to equity financing. our economy, like that of our euro area neighbours, is seriously lagging behind in this field : in france, equity financing only amounted to 79 % of gdp in 2019, compared with 122 % in the united states. ( iii ) the weight of the risk margin, which on average accounts for 30 % of capital requirements at the european level, needs to be reduced. the current method of calculation is too prudent and penalises long - term insurance products such as savings, retirement and prudential products. ( iv ) last, we need to move towards greater simplification : “ what is simple is always wrong. what is not is unusable ”. i this irrefutable observation from paul valery should be an incentive for us to push for concrete measures to simplify the standards and converge supervisory practices. i'm thinking about a reduction in the reporting burden and requirements for activities that are low risk. and on a more structural level, i'm thinking about the overcomplexity of the method for page 6 of 6 calculating mathematical reserves, which undermines the comparability of prudential balance sheets. with the upheaval currently underway in standards, it would be a mistake to roll out ifrs 17 too prematurely. let ’ s take it slowly, and grant our insurers a little respite so they can assimilate the regulations and prepare, to the best of their abilities, for the future requirements. this extra time would also be useful for the iasb, to allow it to take full account of the concerns of europe in the current low rate environment. * * * my conclusion aims to