this is a topic i will return to with regard to housing and house prices. the pandemic also occurred during a secular decline in nominal and real ( inflation - adjusted ) interest rates ( figure 4 ). lower real interest rates reflect lower expected future gdp growth rates and higher savings. lower nominal interest rates reflect the addition of declining inflation expectations. the extremely low level of nominal interest rates has led central banks – including us – to develop additional monetary policy tools which remain effective but relatively untested. 10 figure 4 : 10 - year government bond yields in selected countries source : haver analytics 9 reserve bank briefing to the incoming minister 2020 10 monetary policy : same objectives, different challenges, speech by adrian orr, governor rbnz, september 2020 the pace and magnitude of the pandemic - induced economic shock also necessitated unprecedented coordination between policy agencies, and between government and the private sector. ‘ outsourcing ’ policy implementation – such as mortgage deferral or wage subsidies - has proved necessary. of significant interest to central banks globally was how timely and effective fiscal policy could prove to be in support of demand management? ‘ quite timely and very effective ’ was the answer across many countries – with a ‘ very timely and effective ’ answer here in new zealand. in recent months we have seen significant fiscal and monetary policy collaboration in both demand - side management and ensuring financial markets remain liquid and functioning. along with this collaboration, the reserve bank has been actively ensuring that people understand the similarities and differences between ‘ quantitative easing ’ ( our large scale asset programme ) 11 and direct financing of debt. while there appears to only be subtle operational differences between the two concepts, there are significant institutional differences. the government ’ s debt issuance – or bond programme – is purely a fiscal policy decision, based on the government ’ s spending and investment intentions. under the bank ’ s lsap programme, the quantum and timing of our government bond purchases were decisions made by our operationally independent monetary policy committee ( mpc ), with our purchase solely from the secondary market. the mpc ’ s aims were to lower interest rates across the new zealand dollar yield curve so as to meet their inflation and employment remit. mpc ’ s decision making processes and the bank ’ s lsap operations ensure that monetary policy and the government ’ s debt management policy are independent. a crown indemnity insulates the bank ’ s balance sheet from the financial risks associated with lsaps in the absence of a significant increase in

alan bollard : the implications of the canterbury earthquakes for the reserve bank opinion piece by dr alan bollard, governor of the reserve bank of new zealand, at the implications of the canterbury earthquakes for the reserve bank, 13 may 2011. * * * as canterbury ’ s recovery from its devastating earthquakes progresses, it is timely to assess the economic damage in canterbury and beyond, and consider what the reserve bank – and monetary policy – should do. prior to the february earthquake, new zealand ’ s economic activity had been weaker than expected through 2010. households were already spending less, focusing on reducing debt, and this had slowed business investment. by late 2010, however, signs of recovery had begun to emerge, notably among exporting firms benefiting from improved overseas demand and commodity prices. the february earthquake disrupted this recovery. it resulted in significant loss and trauma, compounding the effects of the september 2010 earthquake and subsequent aftershocks. in addition to the considerable impact on peoples ’ lives, there has been substantial damage to assets, as well as disruption to economic activity. the total cost of damage has been estimated at $ 15 billion – approximately 8 percent of annual nominal gross domestic product. that is a very large proportion of our economic activity, in relative terms twice as big as the impact of the recent japanese earthquake. these estimates are very uncertain and could move around a lot. the vast bulk of the losses to residential and commercial property will be covered by insurance – via the earthquake commission ( eqc ) for residential property, and private insurance for both residential and commercial property. unlike some other countries like japan, there is a high level of reinsurance in new zealand, meaning the majority of privately insured losses will be borne by global insurance companies rather than domestic insurance firms. the government will bear the majority of the remaining losses, with an estimated $ 3 billion in damage to uninsured public infrastructure and government buildings, as well as the costs being met from the eqc reserves. fiscal costs will also include the array of additional government support programmes – support to small businesses, clean up and recovery costs, and acc payments. these costs are material and will place pressure on the crown accounts at a time of fiscal consolidation. we see three distinct phases in economic activity following the earthquakes : disruption, stabilisation and reconstruction. economic disruption is most pronounced in canterbury, but flowing through to other regions. consumer spending, tourism and residential investment can be expected to have deteriorated. most businesses with operations in the