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

adrian orr : we are not alone with monetary policy comment by mr adrian orr, governor of the reserve bank of new zealand, 28 august 2019. * * * it was clear that even in the remote mountain region of the us state of wyoming we were among the crowd. the annual august kansas federal reserve ’ s summit of many of the world ’ s central bankers vividly highlighted our commonality. inflation has been low and stable, and many labour markets are near their peak loading. new zealand included. independent central banks have successfully achieved their inflation goals, promoting economic wellbeing. yet, there was no vigorous back patting. there were mostly furrowed brows. a slowing global economic outlook, increasingly prompted by pockets of volatile politics, is keeping the world ’ s central bankers busy. in response to the economic chill, central banks around the world have lowered interest rates – often to record lows – to promote investment and spending. they continue to pursue their mandated low inflation goals. that ’ s our job. we aim to keep inflation low and stable and contribute to maximum sustainable employment. this is the best we can do as a central bank to promote economic wellbeing. we have the one main instrument – the interest rate lever or price of money – and we use this tool with our best view of what ’ s on the horizon. we provide forward guidance on our expected activity, but remain flexible to incoming data. monetary policy remains as effective as ever, and for small open economies like new zealand, the exchange rate plays a significant additional role in competitiveness. our research gives us confidence that even at these low levels of interest rates, monetary policy remains as effective as ever at providing timely economic stimulus. as the governor of the swedish central bank noted – those who think that monetary policy is losing its vigour should think of the alternative. higher interest rates over recent times would have meant we undershot our inflation and employment goals, have significant weaker activity, and a rising domestic exchange rate – until it was unsustainable. but there are natural limitations to what central banks can achieve with their tools, and if operating alone. global integration, productivity and technology, governments ’ fiscal and regulatory policies, changing demographics, consumer preferences and climate, and unanticipated events – including political volatility – play the dominant role in long - term prosperity. central banks operate within this context and need all policy levers working. my colleagues at the summit were very humble as to our influence over long -