- stability / climate - change rbnz financial stability report, https : / / www. rbnz. govt. nz / financial - stability / financial - stability - report / fsrnovember - 2018 / the - impact - of - climate - change - on - new - zealands - financial - system the investment implications of climate change is also a topic that we are looking at and contributing to policy and regulatory discussions on. we will look for more opportunities to further support sustainability through our own investments. 26 building a modern fit for purpose central bank as is evident from this long list of ‘ to dos ’, for us to continue to be successful we need to grow our capability and capacity, and improve on what we do. there are real operational, legal, financial, and reputational risks to the bank, and new zealand ’ s financial landscape, if we don ’ t make the appropriate investments in a timely manner. the direct and opportunity costs of falling behind on investment are significant – witness the cost of bank failures, and financial volatility and uncertainty, in recent history and ongoing today in some countries. at the very least we must meet international regulatory standards, which are viewed as a license to operate internationally. we have had this made clear to us from the international monetary fund, the financial action task force, and the bank for international settlements, amongst others. we need to enable new zealand businesses on the international stage, and minimise the chance of organised criminal and terrorists groups trying to exploit new zealand's financial system. 27 we also want to enable new zealand ’ s leadership role in our own region of the world while managing financial risks. a good example is our growing role in the pacific. new zealand is a relatively small economy by global standards, but we are an important part of a region of many, much smaller, pacific economies. our pacific neighbours depend heavily on remittances from people working and living in new zealand and australia. the average cost of remittance is 10 – 12 percent. this is higher than the global average cost of 7 percent and the un ’ s sustainable development goal of 3 % globally. 28 as such, it is important that we gain confidence in the efficient working of this market with a view to seeing this price come down. many firms and / or individuals struggle to get the necessary bank accounts in new zealand to be able to lower this cost, with this challenge exacerbated by international requirements established to counter money laundering and the financing

economies perform better if people making investments have a stable currency by which to measure the value of commercial decisions over time. i ’ ve talked about social justice, and the way inflation harms the poor and benefits the rich, and so on. maybe what we, the reserve bank, have failed to do is talk about the value of price stability as a private good. more specifically, maybe we ’ ve failed to take the lead in saying : “ all right, low inflation is here to stay. this is what you need to think about in personally managing your affairs given that fact. ” [UNK] as we bounced this idea about, another staff member said : “ yes, just this weekend, my father - he ’ s got a few properties - said : ‘ back when there was inflation i knew how to make money - but now i don ’ t ’. ” at the moment we are investigating some media strategies to start talking about this. i don ’ t know if anything will come of it, but i do think there is an important point here. the virtue of price stability as a private good is a case that hasn ’ t been won yet, or at very least we have failed to explain the implications of low inflation at the individual level. for example, people need to think about questions like : “ does that second property make sense if, over time, its value will increase at little more than the average rate of inflation, indeed for some properties at less than the average rate of inflation? given the extent to which property prices have risen faster than incomes over the last few years, is there a risk of a substantial fall in property prices over the next few years? would i be better investing in financial assets that earn interest? does putting that deck on the house make sense given low inflation, or will i be over - capitalised? this mortgage is stretching my finances to the limit, so can i endure it, given that my debt won ’ t be wiped out by inflation in five years ’ time? ” am i just seeking to re - educate townies doing up old villas in grey lynn, not because they want to live in them, but because they plan to sell next year? well, no. when farmers were in distress about non - tradable inflation and the “ blunt instrument of monetary policy ”, i and one or two others on the receiving end, said : “ hold on, what about the runaway prices for farm land? they ’ ve been going up just as fast