stretch fiscal positions. fourth, global imbalances were also continuing to worsen. while the causes of these imbalances are complex, the lack of fully flexible exchange rate regimes in some countries was undoubtedly an aggravating factor. large and growing current account deficit countries in many western economies were mirrored by large and growing current account surpluses in other countries such as china. these surpluses then formed the basis for much of the financing of the debt - fuelled imbalances occurring in the western economies. surprisingly many of these phenomena were largely ignored by policy makers, until it was too late to intervene. the financial institutions and rating agencies that were meant to monitor and price for risk proved to be more interested in short term profits and management bonuses. governments were reluctant or unable to take the longer view in terms of their fiscal positions. the regulators in western developed economies displayed a notable bis central bankers ’ speeches reluctance to take action at an early point when it might have made a difference. in the end the inevitable financial crash occurred and governments around the world were left to pick up the pieces and the taxpayers the tab. what the financial collapse revealed was a world economy that was “ seriously imbalanced ”. on the one side stood the western developed economies whose societies had expanded debt, both private and public, to maintain and lift living standards. while, on the other, the newly emerging economies, benefiting from globalisation and the low cost production of manufactures, had recycled their earnings as savings to the western economies. for most of the 2000s this apparently mutual beneficial relationship persisted, but eventually it unravelled as a substantial part of the debt accumulated in the developed countries turned out to be unserviceable. the pressures of rapid growth in the developing countries were also becoming apparent. oil prices started to rise rapidly from a low of around $ 20 a barrel in 2001 to a peak of $ 140 just prior to the gfc. currently the price of oil is around $ 100 a barrel. this represents an ongoing weight on economic activity that did not exist at the opening of the 2000s, despite the fact that the world is in a period of low growth. there was also strong growth in non - oil commodity demand and prices. hard commodities, like iron ore, coal and industrial metals were sucked into china and other east asian economies to fuel industrial development and urbanisation. while soft commodities, like dairy products and meat, experienced substantial volume and price increases as the rapidly growing middle classes in the emerging countries

we were prepared for. the new zealand economy is a small boat on a turbulent global sea. 4 secondly, the single most important thing we as central bankers can do is to ensure the economy and in particular the financial system ( the oil that keeps the boat ’ s engine running ) is highly seaworthy at all times. this means building resilience, maintaining private sector and public - policy buffers that can be drawn on when required, and having enough policy flexibility to be able to exercise a variety of tools and settings when needed. our review and decision to lift banks ’ regulatory capital requirements was a major step forward in this respect. one of my more pleasurable responsibilities has been as a member of the east asia - pacific ( emeap ) deputy governors six - monthly meetings. it is always enlightening and humbling comparing and contrasting central banking policy approaches in the international context. these discussions regularly remind me that we are in the mainstream of countries looking to lift their bank capital levels in order to provide adequate resilience. the pandemic has been a further pertinent reminder to all of the benefits of higher capital. 5 regulatory approach the international context leads me to my next topic. new zealand is a net importer of capital and reliant on strong credit standing ( though less critically so than in the past ). 6 we welcome international financial institutions and open capital markets for the innovation, networks and lower cost of capital they bring. of course, there can be attendant volatility or fickleness so we need good international relations and we value our participation in international fora. our close working relationship with apra is especially important ( and the broader trans - tasman banking council ), given the dominance of australian banks, as are the wider basel, bis, iosco, ngfs and emeap communities. the imf financial sector assessment program ( fsap ) review of our regulatory framework in 2016 – 17 endorsed a number of key features and competencies in our regime, while at the same time setting the bar higher in terms of the international benchmark for regulatory discipline ( more intensive supervision and enforcement, greater operational independence in macro prudential policy, and more standard and higher regulatory requirements for crisis management and fmis ). we accepted the challenge and ( aided by increased funding ) have been actively strengthening our regulatory pillar, whilst maintaining continued attention to the market and self - discipline 2 / 6 bis central bankers'speeches pillars. 7 the development of the