, has again disrupted port services, causing massive shipping delays in major chinese ports and pushing up already elevated shipping costs. 6 / 9 bis central bankers'speeches the potential for second - round effects the third upside potential relates to second - round effects. an example best illustrates this : today, the price of hairdressing is visibly above its pre - pandemic trend, and unlikely to reverse in the future, given sticky prices in this sector ( left chart slide 17 ). so, even if current price dynamics will ultimately be limited to a one - time level effect, if it extends to a broad category of goods and services and if it is not matched by higher wages, it may depress real incomes. perceptions of an erosion of purchasing power may be reinforced by price increases being concentrated in frequently purchased consumer goods and services ( right chart slide 17 ). second - round effects refer to the possibility that a transitory rise in inflation may lead to stronger wage growth if unions attempt to re - establish workers ’ pre - pandemic purchasing power, which may subsequently lead to firms passing on higher wages to final consumer prices. typically, central banks watch second - round effects with great caution, as they have the potential to alter the persistent underlying direction of inflation. today, however, with trend inflation having moderated visibly in recent years, and with real compensation per employee having expanded at a pace considerably slower than productivity per employee over the past two decades, a virtuous price - wage spiral may support demand, sustain underlying inflation and thereby help inflation to converge to our aim. the chances of such a spiral materialising critically depend on the broader labour market situation, including the bargaining power of unions as well as the impact of the phasing out of job retention schemes on employment and wages. at the current juncture, broader measures of labour market slack remain at very high levels, both when accounting for the number of workers in job retention schemes and for discouraged workers who left the labour force during the pandemic ( left chart slide 18 ). surveys confirm that, so far, most firms do not see labour as a factor limiting production. as a result, negotiated wage growth in the euro area remains at subdued levels ( right chart slide 18 ). two factors might, however, strengthen the bargaining power of workers in the recovery from the crisis. one is skill mismatch. the post - pandemic economy will be different from the pre - pandemic economy. some sectors will shrink, others

alan bollard : a financial system that works for new zealand excerpt from an address by dr alan bollard, governor of the reserve bank of new zealand, to the financial services institute of australasia, wellington, 23 may 2006. * * * " in our latest financial stability report ( fsr ), issued on 19 may, we assess that, over recent months, the new zealand and global financial systems have continued to perform soundly. however, signs of increased volatility have emerged in some markets ( eg, commodities and foreign exchange ) and some major challenges to financial stability persist. " the reserve bank's interest in financial stability and banking regulation is to ensure there is adequate identification, pricing, and allocation of risks to the new zealand financial system. " many of the current challenges to new zealand financial system stability were identified in our november report, and some have increased. for example, new zealand banks have continued to raise their exposure to the housing market. a very large proportion of foreign capital being utilised in new zealand is now intermediated through the banking sector via secured residential mortgage lending. a slower housing market will thus pose challenges to bank risk management and we will continue to monitor this closely, especially when implementing the new bank basel ii capital requirements regime. " in addition, some ( but not all ) finance companies raising funds from the public have accumulated large exposures to property and consumer finance. these institutions could be hardest hit by slowing spending ; especially those that have recently experienced rapid growth and have limited experience in managing downturns. " new zealand households have also been increasingly ready to purchase property for investment purposes. household indebtedness has increased significantly, so that over time households have raised their financial vulnerability to interest rate changes, unemployment, and swings in rental incomes and property capital values. on balance, the data suggest that the new zealand household sector has continued to increase its financial concentration and overall debt exposure. " a slower growing economy will bring challenges to some households, in particular lower and middle income households that have large debt - servicing needs. " meanwhile, new zealand's financial markets have remained sound. the decline in the new zealand dollar over the march quarter, from its previous exceptionally high level, represents some reduction in risks. the depreciation was managed in the foreign exchange market with good liquidity and efficient pricing, and was principally a cyclical adjustment to better reflect the underlying fundamentals of the economy. " we have also been working with banks to