##enny, n ( 2012 ), “ matching efficiency and business cycle fluctuations ”, reserve bank of new zealand discussion paper, 2012 / 06, study the impact of changes in matching efficiency on us business cycles, finding that the impact can vary depending on the type of hiring costs faced by firms. craigie, r, gillmore, d and groshenny, n ( 2012 ), “ matching workers with jobs : how well is the new zealand labour market doing? ”, reserve bank of new zealand bulletin, 75 ( 4, december ) : 3 – 12, discuss the new zealand situation, highlighting the increased matching inefficiency in canterbury following the major earthquakes there in 2010 and 2011. bis central bankers ’ speeches according to a recent survey of new zealand businesses. 6 conversely, high unemployment puts downward pressure on wages and prices. with that framework in mind, we can look more closely at the factors driving the market and the consequences for inflationary pressure. labour supply the labour that is available to be employed ( labour supply ) is determined by three main factors. 7 first, is the working age population, itself a function of demographics and migration. second, is the share of the working age population that participate in the labour force, either by working or by actively seeking work ( the participation rate ). third, is the amount of time ( number of hours ) that people in the labour force are willing to work. average hours worked per person have changed little recently. the main drivers of the rapid growth in labour supply are participation and population increase ( figure 2 ). many of the underlying demographic trends affecting the labour force are slow moving, and do not tend to affect monetary policy decisions from quarter to quarter. they do, however, have bearing on the conduct of policy, affecting long - run supply capacity, potential growth and neutral interest rates, so generally it is appropriate to consider both structural and cyclical forces. not so long ago, the then government statistician8 projected the coming decades would exhibit much slower growth in the labour force and painted a picture of rising labour see parker, m. ( 2014 ), “ price setting behaviour in new zealand ”, reserve bank of new zealand discussion paper, 2014 / 04. abstracting from considerations about skill levels or the quality of labour input. given increasing educational attainment, labour ’ s contribution to growth has been stronger than aggregate hours. see statistics nz, ( 2008 ), ” accounting for changes in labour composition in the measurement of labour

in providing payment and settlement services which are necessary for households, business and other financial institutions to settle day - to - day transactions. as a country becomes more developed, one typically sees the capital markets playing a greater role in supplying financial products and services relative to that supplied by the banks. in many advanced economies, for example, raising business debt through securities rivals or exceeds that provided though the banking system. unusually, new zealand has a large banking sector, while the role played by the capital markets and non - bank financial institutions is small. table 1 compares new zealand to five other economies whose banking systems also tend to dominate their financial systems, using data immediately prior to the financial crisis as compiled by the imf. 1 table 2 compares the new zealand and australian financial systems. the following points emerge : relative to the financial system as a whole, the new zealand banking system is large in common with the other countries included in the table. new zealand ’ s banking system is larger than australia on this metric. in relation to the size of the economy however, the new zealand and australian banking systems are of roughly equal size, and much smaller than the other countries identified by the imf. new zealand ’ s financial system is much smaller than in the other economies included in table 1. on the eve of the crisis iceland ’ s financial system was 4 times as large as new zealand ’ s. new zealand ’ s financial system is also smaller than australia ’ s largely reflecting australia ’ s compulsory superannuation and the large funds management business. the new zealand banking system is not as internationally active as the countries in the imf sample as measured by gross foreign assets and liabilities. however, our banking system ’ s negative net foreign asset position in 2007 was similar to ireland ’ s, imf ( 2010 ), “ cross - cutting themes in economies with large banking systems ”, policy paper, 16 april. bis central bankers ’ speeches but smaller than iceland ’ s. ( the rest of the world ’ s net claims on the new zealand banking sector is also reflected in figure 1 below ). new zealand has a relatively highly concentrated banking system, even compared with those countries with large banking systems. the big four australian - owned banks command a larger role in the new zealand financial system, compared to their parents in australia. table 1 : bank - dominated financial systems before the crisis – a comparison iceland ireland switzerland hong kong singapore new zealand financial sector size and growth financial sector assets ( % of gdp, 2007 ) financial